Advice Line with Steve Case of AOL

25:15I kind of knew about snow in theory, but in practice, I remember going to class, I think it was in October, and it was in shorts and flip-flops. It was, I think, 60s or so. I left the class less than two hours later. It dropped like 30 degrees, and there was six inches of snow, and I had to stumble back to my dorm. So, yeah, that was welcome to the NFL. This is this thing called winter. Yeah. You needed to find a local therapist. Mindy would have helped you at the time. Exactly. I needed Mindy knows back then, or at least my parents did. Mindy, how did you come up with this idea? I was a stay-at-home mom.

25:51I was able to stay home with my kids for a long time. And then when they were in their teens, I started to think about going back to work. And simultaneously, when I sent my first child off to college, I joined a Facebook parent group. And I saw all the things that the out-of-town families needed for their students. And I realized that we had an opportunity to help. I'm a social worker by training. And I just realized that it's very challenging to be far away from your kid. And we could make it much easier and more stress-free. So we launched in 2019. And this year, we expanded. And we're now on 11 campuses.

26:30Awesome. And tell me a little bit about your business model. How does it work? Our business is a membership-based business. We have a monthly, a semester, an annual, and a four-year option. We like to feel like we're kind of like a family from afar. I think the students kind of think of me as a kind aunt. And we form a relationship so that when things come up, and they inevitably do come up, the parents have a sounding board and a support system in town in a place where they may not be lucky enough to have a local relative or friend. Yeah. And how do you think about the pricing? I could see you wouldn't want to charge per event because that's kind of hard.

27:14Getting some kind of recurring revenue stream would make sense. At the same time, it seems like the kind of thing you might need two or three times a year. Is it better to have a monthly fee or an annual fee? Or is it better to say you can get five or 10 of these kind of consults? How did you think about it? Have you tried different things in different schools or are there one pricing structure across all of them? No, each of the schools is different because every school is very unique. Here in St. Louis at Wash U, we've tried a lot of it. I always wanted that ongoing relationship. I just didn't want to be a one-trick pony.

27:52But we did add the monthly option. I think the best thing is if you're paying X number of dollars to send your kid off to college, our annual fee seems relatively reasonable. And then you just have the support when the things come up. But we also do do the monthly option. And what we find is that once people use us, then they continue on. And I think they feel a connection and so continue working with us. Mindy, before I forget, what's your question for us? Well, my question is about customer acquisition, especially at our new locations. It's been a challenge. The schools themselves are not going to give us the list of their parents.

28:34If they did, we'd be set. So we do a lot of guerrilla marketing because it's a challenge to get to the parents. The kids are the ones that are here. So we have done Facebook ads and Instagram. We've had an influencer. We hired a PR firm. And we know from our experience here in St. Louis that the customers, they join us and then they stay for four years. We make an impact with them. But getting the new customers, especially in the new communities, is so challenging. Yeah, I wonder if in terms of attracting customers, maybe in some cases, it's better to target the parents before the kids go to school.

29:16because that's a time where there's a little bit of transition, then people might, even if they don't have a particular need or a particular problem yet, it's almost like buying a little bit of an insurance policy just so they can rest assured that if a problem comes up, they've got somebody on point who can help there. So I don't know if that could be working with high schools to something that they can make available to the parents before the kids even head to college. Have you tried something like that? It's a great suggestion. And we've talked about that when we were only at WashU, it didn't feel as we weren't as memorable.

29:50The larger we get, the more schools we're at, then the more that that technique, I think, makes sense or that that, you know, I think that makes a lot of sense to go to the college advisors. Maybe they wouldn't help share with their parents what we do. Yeah, I think it's a good suggestion. One of the things that I keep thinking about is it's been a tough couple of years to be a college student all around. Right. There's been a lot of turmoil on colleges. And I think that a lot of parents are, you know, just concerned about about their kids, their safety or their mental health. You know, the reality is a lot of young people are reporting mental health challenges in ways that we have not seen in previous generations.

30:33And so I wonder whether you start by connecting with community organizations around the country that have connections to the universities, you know, religious organizations or centers where students congregate and gather, and really trying to see if they would be receptive to hearing you out and what you can offer. If I could figure out what those organizations are, I would love to reach out to them and try and make that connection. Absolutely. And most schools now, they quickly tend to have Facebook groups and other groups where the students start gathering and getting to know each other and even the matching in some colleges and universities around roommates and so forth.

31:15It starts building some of that. If there's a way to interject there, I think it makes sense. And one of the businesses I started when I was at college targeting parents was something we called the magic bus. And for parents who weren't going to be going with their kids to college, they're going to fly like I did from Hawaii. Basically, we said, we'll pick you up on a bus and all the other students who are flying in for the first time will be on that bus. So it would be just freshmen. It'll be a fun bus with entertainment and refreshments. And so instead of having them arrive at the airport by themselves, lonely, scared, they instantly have a community.

31:51And parents resonated with that because they dealt with one of the concerns they had. And as a result, actually, the college was willing to give us their mailing list of incoming freshmen. So something like that as a way to start creating a service that's of interest to the colleges as well as the parents. And then from that, maybe you can offer more personalized services that are available. I think you've got to figure out some way to interject yourself as they're making the transition before they arrive on campus. That's probably the point where parents are most motivated to want a service like this.

32:26Absolutely. I think that's a great, great idea. Also, just to piggyback on that, we have, at least here in St. Louis, and I think at a lot of these schools, so many international students who literally are coming from across the world, their parents don't come in with them. A magic bus would be a great option for those international students. We know there's a wonderful opportunity there to help kids who are so far from home. Yeah, for sure. For sure. It's a really cool idea. And I'd have to imagine that there are physical mailing lists that are still available to buy. I mean, there are hundreds of thousands of young people who go off to college every year.

33:05And there must be ways to reach their parents. And I wonder whether those mailing lists are affordable. Is it something you've looked into? And is that something that you'd be open to doing? A mailing list would be our mothership. We would love to have a mailing list. I just haven't known where to go to find that. If it were available, I would be willing to invest heavily into it. Absolutely. It might even be, it ties in with a little bit, as I was saying before, a little bit of a welcome wagon idea. that not so much the magic bus, but not everybody who goes to college ends up staying. Some people, for whatever reason, don't make the transition from starting to graduating.

33:45And that's a concern to parents. It's also a concern to the high schools and the counselors and others. So something that positions this as a way to maximize the likelihood that not only you arrive and you're happy and get connected to other people, and if you do have some particular problem, you know, there's somebody there to help, but also will maximize the likelihood that you'll be successful there and be able to graduate. It's almost like buying the insurance policy. And with insurance, you know, the insurance companies know that most people are not going to have a problem, but a few will, and they get everybody to sign up just in case.

34:22Is there a way to price this more affordably as more of an insurance policy and know that Most people will not actually use it, but it will be something that will be provided, a source of comfort to everybody. Oh, that's very interesting. I actually never thought of that. We've shied away from any kind of scare tactics. We don't want to put fear into anyone's head. But if we did try to position it as an insurance policy, and maybe at a lower price point, it might be a... But then we would probably have to limit the scope of what we do. because if we had more customers. Maybe, maybe. But my experience with AOL, we basically, when we went to unlimited use, there were some people using it all the time and we lost money on them and some people using it infrequently and we made money on them.

35:13So it ends up being a law of the averages. But you also could put some kind of mechanism in place saying it basically, unlimited service, unlimited coaching. But if it gets used too much, you can say, well, actually, we're now going to limit it to, you know, two times a month or five times a month or something. So a few people don't end up driving up the cost for everybody. Yeah, for sure. Great suggestion. Thank you. I appreciate that. Thank you, Mindy Horwitz. Mindy knows. Good luck. Thanks for calling in. Thank you so much. Good luck, Mindy. Thanks, guys. All right. We're going to take another quick break, but we'll be right back with another caller.

35:48Stay with us. I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This Lab. Thank you.

36:36Thank you.

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37:54Welcome back to the advice line on how I built this lab. I'm Guy Raz. And today I'm taking your calls with Steve Case. So Steve, let's let's get right back into it and take another call. Hello, welcome to the advice line. You're on with Steve Case. Please tell us your name, where you're calling from and a little bit about your business. Hi, Guy and Steve. It's really great to meet you. My name is Jason Levi. I'm calling from Las Vegas, Nevada. And I'm the co-founder of Kidenza. And we make early childhood music education products that make learning about musical instruments fun and engaging. Awesome.

38:31And what ages are your products for? The youngest kids, like two to five, roughly. And so when you say products, be more specific. What are you making? So our first offering is a series of board books that have QR codes throughout them. So the adult can scan to pull up sounds, videos, demonstrate musical concepts, and even like simple physics explanations like showing vibrating guitar strings and things like that. And it supplements the page content and really brings instruments to life for these kids. All right. Tell me a little bit about how you came up with this and what is the vision for what you want to build?

39:11Yeah, absolutely. I'm a professional trumpet player in Las Vegas. Love it. Yeah. And I'm married to another musician, a violinist. And we have a wonderful four-year-old daughter together who loves music. Like, no surprise there, right? It's in her DNA. So we were listening to music one day. And I was trying to teach her about what she was hearing. Like, oh, you hear that low groove, that ba-doom, ba-doom, ba-doom, ba-doom, ba-doom, ba-doom, ba-doom, ba-doom, ba-doom. Oh, okay. That's the bass guitar, you know? and then oh you hear those fast notes that oh that's the saxophone right and so like she's sort of understood but not really so would have to go sit at the computer or look at my phone and i'd have to google image search for a reasonable picture of the instrument and then try to find a kid-friendly youtube video to show someone playing it or how it works and the whole thing felt really arduous even to me and like i know a lot about instruments so that was the oh there's got to be about her way moment.

40:09And I started thinking about ways to make learning about instruments easier and more accessible. And so that brings me to your second part, like the why, like, why did we want to do this? And Guy and Steve, like, I hope you've had this experience in your life as well. Like, music is such an awesome emotional connection point from older generations to the newer. You know, my daughter's four. So when I play her Earth, Wind and Fire, or Marvin Gaye, or Ella Fitzgerald, she doesn't know that it's, I'm air quoting here, old or uncool for kids to listen to. She just hears music for music's sake. So I'm really enjoying this time period of connecting with her via music that I love and feeding her curiosity about the instruments that make it.

40:56And that's the why. That's the whole point of why my co-founder, Noelle, and I are building Cadenza is to nurture those musical connecting moments between generations. And Jason, tell me a little bit about who you think your target audience, I mean, obviously it's two to five-year-olds, but who are the kinds of parents who are going to buy? I mean, I know that exposing kids to music from an early age and ideally getting them to learn how to play an instrument does fire up things in a kid's brain that can be extremely beneficial as they develop. Who are you targeting? What kinds of parents are you trying to get at?

41:31Obviously, I think like parents that are musically inclined or musicians themselves are a fairly easy sell. But, you know, music loving people in general. So people that music is a part of their life and that's how they want to connect with their kid. So that kind of leads me to my question now, I think, if you don't mind. Please. Yes, please. OK, good. So the analytics from our online advertising show that people that engage with our ads, are overwhelmingly women over 55. So really grandparents more than parents, right? Which is a surprise because I thought, well, I'm writing, we're writing kids books right now and I assumed we're marketing to parents, but it's really grandparents that are clicking it up on our ads.

42:16However, the conversion rate for that section is very low. So like our question is, is there a better way to connect with and convert the grandparent aged audience, whether that's online or offline? Well, here we go. I feel like I'm your guy today because five years ago we had no grandkids and now we have five, all under five. And so I think I'm the target market. And I'm not surprised that, you know, grandparents are interested in part because they're probably trying to supplement some of the things that parents are doing that are kind of fun and creative. And music is obviously a good one to do that.

42:54So I think, you know, trying to figure out ways to reach grandparents makes sense. I think maybe a press effort focused on Magazine for Grandparents or partnering with ARP, which by definition has a group of people over 50 or podcasts. I think that would make sense. But I'm not at all surprised that grandparents aren't a key market. The question is, what's the most efficient way to reach them? And so they can learn about this and buy it. Right. Yeah. Like they're being reached online. They're just not converting. So I'm not sure what the reason is why exactly. I think that the key is to keep it simple.

43:32I'd go back to exactly how when they're learning about this, you know, if they're reading an article or hearing about some kind of promotion you have, how do you simplify, you know, what it is? and make it really easy to click and buy, kind of like Amazon one-click buying, I think would be key to that. Just figuring out other ways to make it really easy to buy, offering guaranteed return, things like that, to kind of de-risk it. And the other thing is you mentioned people would have some predisposition around music targeting those particular groups, I think would make a lot of sense. Maybe bundling the book with a little kid's guitar, kid's ukulele, something like that might be another way to do it.

44:12Right, absolutely. Yeah, to that point, when we started it, we weren't entirely sure. It was originally going to be like a magazine, something that came once a month. And then we were thinking maybe subscription boxes. But then we landed on board books first because just to have a bundle to sell. So right now we have two books available. There's piano and guitar. And we're working on one book for each instrument family after that. So there's going to be woodwinds, brass, strings, percussion, and voice are forthcoming. And in phase two, as I like to call it, we would like to make games, cards, stickers, puzzles, etc., other things to make it really more of a products business and not just selling books.

44:51It seems to me that this, at least initially, to get to really gain some traction, you've got to have this in stores, in boutiques. And in like a food product, it seems to me that there's a huge opportunity here to demo this. like literally sit in a bookstore or a library and demo this thing. But I also feel like just having a D2C online is going to be a little bit more challenging just because, especially with a target audience you're going for, I mean, they go to stores. People over 65, they're going to go to a shop. So I would consider reaching out to some of these stores and seeing if they would just carry the books and display them.

45:34Yeah, no, that's a great point. We are in a toy store, at least one toy store in Los Angeles. He ordered a dozen books a little while ago, and then we just heard from him again that was like, hey, I'm all out. Now I want a dozen books. Oh, great. Bingo, bingo. That's working well. We started offering the guitar book only in Q3 last year. We really only had one book. Only recently now we've received the piano book in stock. So now we have two kind of out of the seven. So we haven't put like all of our chips, all of our marketing chips in yet because I want the most bang for our buck. I think that's great.

46:15I'm glad to hear you have this broader product line, probably because obviously the different instruments that people want to learn about. But also it gives you the ability to spend more on marketing because you're not just selling one book for$20 or$25. You're trying to build a broader, maybe even over time, figure out some way to subscriptionize it. But I agree with Guy, if you're in some of the stores targeting young kids, that's a great place to launch. And then over time, figuring out ways to offer more products and services. And ideally, instead of having it be a one-off purchase, turn it into much more of an ongoing recurring revenue subscription kind of offering.

46:51Yes, that's absolutely the plan. Yes. We didn't want to just try to sell books. We wanted to make a music education product company that helps people engage with music and create memories with their kids around music. Jason Levi, the brand is called Cadenza Kids. Congrats. Good luck. We'll be following you. Thank you so much. This was useful and really fun. Thank you so much. All right. Great, Jason. Thanks. Thank you. um yeah so i mean i think as kind of circling back to my first question i mean it is a on the one hand the barrier to entry is is lower right you can every a lot of people can start web businesses app businesses but it's a lot harder to get attention it's just a lot harder to get the eyeballs on what you're trying to you know sell yeah no it just forces you to be a little more unique, a little more differentiated.

47:45And the best way to create a big business is to create a very small, successful, passionate small business where you've got some real loyal, fanatic customers who love your product, love your service, tell their friends. And from there, you can launch into something bigger. But often entrepreneurs try to go too big, too fast, kind of spread their marketing dollars too broadly. And almost always, it's better to sharpen your focus on a particular target market and a particular kind of niche. But I should also say, guys, you reminded me that I did one of your first shows. Before you launched the show, we weren't even sure whether it'd be successful.

48:20That's right. There was this concept called How I Built This. Yeah, because I interviewed you before we launched. Yeah, at some point, I need to turn the tables here and do an interview with you on how I built this. Because you started with a little idea and turned it into not just a podcast, but really a broader franchise, a broader platform. And so it's a great entrepreneurial journey yourself. You know what? You've just reminded me. Thank you for doing that. That was a big leap because we didn't know you took a risk. And I'll never forget that, Steve, ever. Seriously. It means a lot that you did that.

48:51I'm just proud of what you've built and how it's inspired another generation of entrepreneurs. You know, America is the leading country in the world because we've been the most innovative entrepreneurial nation over the last nearly 250 years. We have to keep doing that and we need to inspire the next generation. So thank you for doing your part. Totally. Steve, already when you were in college, you were organizing the party bus and doing all these cool entrepreneurial things. You were like ahead of the curve here. Just trying to make a buck to pay for some beers. But that's the thing, right? That's when it starts.

49:24And I wonder whether if now you could go back to the Steve case who was building what would become AOL at the time, you know, in the mid 80s when it was just a weird idea. Like, what are you doing? What is this? You can do what? Like when people were asking those questions, if you go back to that person and just give him advice, what would you say to him? I would say that you should recognize that big ideas take some time for people to understand and embrace. Usually people are pretty skeptical, cynical, so don't get discouraged by that. And revolutions usually happen in evolutionary ways. It takes a while for things to build up.

50:06I mentioned the early days of AOL when only 3 % of people were online. It really took a decade before it broke through. And there are many times where it didn't look like we were going to make it. Even my parents at one point called and said, you know, maybe you thought about plan B, like this isn't working. And, you know, you have a young family and so forth, which I understood. But we stuck with it. And so I think that notion of passion, that notion of perseverance, having the right perspective, I think is important. Because sometimes businesses aren't really good ideas. And you should be honest about that and say, OK, we're getting the data back from customers, getting the data back from markets.

50:43Maybe this isn't meant to be. Maybe we should shut this down or maybe we should pivot and do something else. But just as often they are good ideas. They just require more patience, more perseverance. So sticking with it also is important. So I'd tell a younger self that if you really want to fight a big battle, you want to climb a big mountain, recognize it's going to be hard. It's going to be frustrating. You might fail, but you might succeed. And you likely will only succeed if you stick with it over a fairly long period of time. There are very few overnight successes. For sure. Steve Case, thank you so much.

51:17Thank you, Guy. Great to be with you again. That's AOL co-founder and CEO of Revolution, Steve Case. And by the way, if you haven't heard Steve's original How I Built This episode, you've got to go back and check it out. It's super fun. You can find a link to it in the podcast description. And here is one of my favorite moments from that interview. So when that deal unraveled, I'm assuming that was the biggest contract that the company had. Yeah, we were banking on that. We just raised a bunch of money, about$5 million, which for us was a lot of money. So when Apple basically said they wanted to pull the plug and pull the rug out from under us, that was a scary time.

51:54Did you think the company was going to collapse? There was certainly a possibility of that. Thanks so much for listening to the show this week. Please make sure to check out my newsletter. You can sign up for it for free at GuyRoz.com. Each week, it's packed with tons of insights from entrepreneurs and my own observations and experiences interviewing some of the greatest entrepreneurs ever. And if you're working on a business and you'd like to be on this show, send us a one-minute message that tells us about your business, the issues or questions you'd like help with, and hopefully we can help you with them.

52:30And make sure to tell us how to reach you. You can send us a voice memo at hibtid.wondery.com or call us at 1-800-433-1298 and leave a message there. And we'll put all this in the podcast description as well. This episode was produced by Sam Paulson with music composed by Ramtin Arablewe. It was edited by John Isabella and our audio engineer was Sina Lafredo. Our production team at How I Built This also includes Alex Chung, Carla Estevez, Chris Messini, Devin Schwartz, Elaine Coates, JC Howard, Catherine Seifer, Kerry Thompson, and Neva Grant. I'm Guy Raz, and you've been listening to The Advice Line on How I Built This Lab.

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