Interview With Andrew Van Noy – November 17, 2015

Andrew Van Noy is the CEO of CloudCommerce, a publicly traded company, traded on the OTC with the symbol CLWD. Andrew recently sat down with CloudCommerce VP of Communications Zack Bartlett for an interview:

Zack: [00:00:37] My first question for you is let’s talk about the industry. Where is the industry at now, where do you see the industry going overall?

Andrew: [00:00:47] Yeah Zack well it’s a very exciting industry. Very fast-paced and we’re seeing how the trends in digital commerce and… with the proliferation of digital in our lives, how it’s really changing how we as consumers access information, make decisions, consume products and enjoy our entertainment.

Andrew: [00:01:17] And it’s no secret, I guess, that this is completely revolutionized how we as consumers access all of this. And I think it’s really exciting because two years ago, I remember when we were building some of the mobile sites for some of the world’s leading sites like Macy’s and Under Armour and Belk. I mean, I remember mobile… it was revolutionizing how people were shopping on mobile two years ago.

Andrew: [00:01:44] And only the leading brands had the money or the wherewithal to get ahead of that curve. I mean that was literally like two years ago, Zack. And now it’s so commonplace that if you don’t have a mobile site… I mean, you’re, you’re lagging behind and you’re not even lagging behind you’re almost obsolete. It used to be desktop… your desktop experience drove your mobile experience.

Andrew: [00:02:06] And you’d focus on desktop UI and user interface first. And then, you would focus on mobile. But nowadays, a merchant’s first impression or first access point to a customer is very oftentimes from a mobile device. You know perhaps the billions of dollars spent in marketing, if you’re downtown New York city, you’re downtown L.A., I mean you’re on… public transportation or you’re walking down the street you’re gonna see something that catches your eye and you’re going to look at it on your phone before you have a chance to go home look at it on a laptop. So…

Andrew: [00:02:40] … nowadays, there are merchants, online merchants, that are focusing more on the mobile experience first because they know that’s oftentimes the first access point to their brand, their brand recognition. So yeah. I mean I think why I brought that up was to see how fast industries changed in two, three years even in terms of mobile is very exciting. And… how I see like, the rest of the industry is you know, who would’ve thought that three, four years ago you could get shipping within two days from a company such as Amazon. I mean literally my wife, who we have four kids now, she will do anything- she’ll go to all the ends of the earth to not have to pack up the four kids and go shopping anywhere.

Andrew: [00:03:24] If she could buy all her groceries and have them shipped within two days and never ever go to the store, she would be like Amazon’s most favorite customer. Because she’s just… it’s too busy, it’s too hectic, it’s too chaotic. The lines and the screaming kids. And so… shipping wars is another crazy thing with technology where the-the big boys like Amazon and Google and Wal-Mart… to think now… I mean, two-day shipping was revolutionary. But same day shipping and one hour shipping in places like New York? I mean who would’ve ever thought we’d be at that place in our industry where you make a purchase from your phone and in one hour in places like New York you got it. It’s crazy!

Andrew: [00:04:03] It’s unbelievable! In New York City you can’t even get from your home to a store through public transportation in less than an hour. And to have that product in your lap is crazy. So, what I think is happening in the industry and this is a long answer because there’s so much going on but the walls between what’s digital and physical are blurring so much that we as consumers oftentimes don’t even recognize anymore what’s, what’s physical and what’s digital. We have digital profiles built around us…

Andrew: [00:04:38] … you know, where merchants know everything about us. I mean it’s kinda scary sometimes but they know where we’ve been, what sites we’ve looked at recently, the things we’ve purchased, our demographic, our age, our income. And they’re able to target us and sell you know. And oftentimes it makes our experiences as consumers that much more enjoyable. So what’s happening? I mean the lines are blurring and merchants that are selling that used to have lots of brick and mortar are now really, like, seeing the effect of digital and they’re really, really transformationally changing their… their structure like Wal-Mart for example.

Andrew: [00:05:15] I know you did a press release a few weeks ago about this… one of the largest retailers in the world is looking at all their physical locations now as a potential distribution center for online orders. A fulfillment center. I mean with that kind of footprint they almost have like, the location around that store can act as same day shipping source. And so that’s how a lot of big merchants are starting to look at their physical assets as how can they get the online order faster to the consumer. So it’s just crazy.

Zack: [00:05:48] This can really contribute to a personalization that actually becomes enjoyable for the user. That actually becomes useful for the user…

Andrew: [00:05:58] I don’t think anyone likes to feel like Big Brother’s watching us. An it’s causing issues with certain parts of the industry … what information is public or what information can be sold to other parties is becoming a problem. And I think that’s what’s going to happen in the next few years is we as consumes are going to have pretty strict control about what we want available. 

Andrew: [00:06:36] But let me give you an example on that. One of the things I hate most on this earth is going to Home Depot. I love the smell of the lumberyard in Home Depot, I love the smell of wood and I love being somewhere where I can build things, but…

Andrew: [00:06:49] … what I hate the most is how big it is, how terrible access to customer service is, and how I feel like I can never find what I’m looking for in those aisles if I need help. And so… here’s how I see the blend between digital and physical can change. If I got online at homedepot.com and did the search of what I was looking for and by the time I got into the store, a sales associate knew that I’m a serious buyer because I’ve already found what I’m looking for…

Andrew: [00:07:19] … now I’ve gotta find it in the store because I don’t want to wait three days, right? Like I just busted a plumbing pipe and I can’t wait three days for shipping or five days. So… if I could walk through the door and somehow a sales associate gets alerted that I already want the item and they can walk up to me either with the item or they can show me exactly where the item is, it can personalize my shopping experience. I would probably buy ten times what I buy.

Andrew: [00:07:56] So, some high-end retailers now are using apps and using mobile web and a digital profile to sell to their customers. So a customer comes into a high end retail store and… everything about that customers profile is available. So not only what they purchased in the store but what they’ve browsed, what they add to cart, what they really like online. And then that sales associate has a digital profile of them and can now make really personalized recommendations. They can say, “Look. I already know you’re looking for these five different red options. This one looks best on you. You’ve just come out of the changing room. This looks great. You should buy it.” You know?

Andrew: [00:08:48] And so… that- that eliminates the whole need for walking around the store, I get really awkward when someone asks me if I need help. My wife gave me another example yesterday. Her sister kind of bragged and rubbed it in. You know we live in Santa Barbara – there’s not a lot of big box options. And her sister lives in Utah and she was purchasing her groceries online. And she pulled up to the store and for an extra two-dollar surcharge they handed her the groceries.

Andrew: [00:09:21] It was like drive-through grocery. I don’t want to call someone I just wanna order what I want online. I drive up, I give them my name, and the order is picked and it’s delivered for an extra two dollars. I mean… most women would probably pay ten, twenty dollars to have that service you know.

Andrew: [00:09:46] and I think what we see in our industry the most as we are talking with merchants is the b to b industry is falling behind.

Andrew: [00:09:56] Why? Because I feel like a lot of people feel threatened that technology will replace the mom and pop personalization where your dealer knows you by name. So they don’t want technology to reduce that level of service. But what we’re finding, especially in that b to b space, when we can really sit down and consult with them which is what we’re really good at doing, we’re able to show them how technology will make their lives better. And it will not only make your life better, It will actually make your customer’s life better. So what that means is, for a lot of b to b merchants, 80% of the sales person’s time is spent with low yield, high maintenance customers. And the real high yield customers that can really support their business, they don’t have enough time to focus on. So when we show them that technology can relieve a lot of that pressure and a salesperson can service their customer base through technology- online ordering, mobile, personalization, – then they’re freed up to really maximize value from their bigger customers. And they’re starting to adopt it really, really fast.

Zack: [00:11:09] And do you also feel like they’re also adopting a lot of the practices that b to C merchants were using?

Andrew: [00:11:18] I think the- the number one objection I would receive from almost every… b to b merchant, business to business merchant, was this: Oh we don’t sell to the end user so it doesn’t matter how nice our site looks. So, what I have to do is stop and say hold on. Your customer, who runs a business and buys in bulk from you, also shops on Amazon.com.

Zack: [00:11:42] Wow. Yeah, that’s… it’s a good point!

Andrew: [00:11:45] And they also buy Christmas gifts online ’cause they don’t like dealing with the hassle of going to a store. So…

Zack: [00:11:50] They’re still a human…

Andrew: [00:11:52] They are- they are an end consumer and what bothers them more is that they have to go to your DOS-looking, black screen with green typeface that’s blinking and order from you. I say, I promise you if you give them a better user interface, you would see an increase in average order size. And what’s happened with customers like Prince Corp, after we built a new online store for them, they saw their-their sales grew dramatically because it was easier for the customers to shop and to order.

Zack: [00:12:20] That’s prince-corp.com, correct?

Andrew: [00:12:22] Right.

Andrew: [00:12:28] So that was user interface I mean… and then personalization. You know the other argument would be “oh you know we know our customers and they order the same things from us all the time so we don’t need that kind of tool. It’s like hold on… You’re absolutely missing the opportunity to upsell and to cross sell. I say you don’t know what products your customers are looking through in your catalog that they may have interest.

Andrew: [00:12:51] But if they had, if you could have a digital footprint and you could see where they’re walking through your online catalog, then your sales person will know there’s more, there’s interest there and maybe there’s a hurdle from purchasing. Maybe it’s education of the product, maybe it’s the price, maybe it’s x, y, z. So the sales people feel more enabled, more empowered to upsell on.., not a sales gimmicky way but to truly have education from their customer and sell. So, absolutely the b to b market is two times the size the b to c market. It’s massive. And it’s untapped and probably five percent of the entire b to b market is even adopting commerce, online commerce. So for us as Cloud Commerce, the b to b market is extremely exciting. We have a very deep service offering in the b to b space and additionally the b to c space, but I think we’re going to see some huge movements in the b to b space. I mean we were consulting with a company just recently that was in the sales process for a new online ordering system. They’re in the b to b space. And we told them that their first year of spend should be minimum a million dollars. But I mean what was important was we as a company offered the custom consulting. They hadn’t done it before, they didn’t know where to go. And so as opposed to just saying you should pay this money for this service, we said hold on. We’re gonna spend the first four months developing your strategy and consulting and architecting this. And that’s ultimately what they want. And… so we’re really hopeful that they’ll choose us. But that’s just a drop in the bucket. I mean that’s most the b to b industry.

Andrew: [00:14:32] They don’t know what they don’t know, and they need companies like Cloud Commerce to lead them.

Zack: [00:14:37] Exciting step. So… so not only that. There’s a lot of really exciting things going on at Cloud Commerce right now. People may have seen the press releases and perhaps the interviews that you’ve been in. There was recently a name change. Now it’s called CloudCommerce. There was also an acquisition. Really big, really exciting news.

Andrew: [00:14:59] Well I think our history’s important to where we’re going and it doesn’t dictate where we’re going but it offered a very strong foundation. For the last fifteen years we actually had our own proprietary e-commerce software. We developed it, we had our own data center. And this was under the Warp 9 brand. And we built really strong e-commerce websites for our customers through that technology. And over time it kind of decayed. It was difficult to maintain. And so we ended up focusing on our strong suit, which was professional services. And what I mean by that it’s the consulting side… it’s the design, it’s the development, and it’s the management of the store once it’s launched. And so, we’ve focused on that and as we’ve seen the market change and the transformation in the industry, we knew that… there’s an opportunity for the market, an opportunity for our shareholders, an opportunity for the company as a whole to reposition ourselves and say we are CloudCommerce. Every transaction that you can possibly think of in the Cloud, this doesn’t have to be a credit card transaction this can be a conversion, and that’s a key word or buzzword. Let’s say you’re a university marketing to students to come to your school or perspective high school students. If you can get them interested to sign up, schedule an appointment, download a white paper, that is a translation that just happened. Potential revenue is coming because of that digital transaction. And so we as Cloud Commerce feel like the positioning of our commerce is that commerce is so much more now than just a credit card transaction and we can help online merchants with their Cloud Commerce strategy. So we re-branded our name. It was amazing, we got the URL which was incredible that we secured that.

Zack: [00:16:49] Cloudcommerce.com, that’s a great URL.

Andrew: [00:16:54] Yeah. And… and if you google Cloud Commerce, we’re in the likes of Adobe and Oracle and IBM, I mean some massive companies pull up. So we’re in a very good space in terms of positioning our company name, our brand, but more importantly what is the vision of what we are trying to do. We are building a group of companies through acquisition where together, we have experts that can cover what any online merchant might need in their e-commerce, digital commerce, offering. So, I mean for example. You have the user interface needs.

Andrew: [00:17:29] How can you use data to help make your design of your site more effective. You have the development, you have the analytics, the data. You have the cyber security. What we’re building is… we are acquiring companies that are experts in those individual areas and together under the Cloud Commerce brand we are able to offer customers an extremely powerful solution to help them sell online. And not only sell but to help grow their brands, to help convert their customers… here’s an example. I know this is kind of a long answer but Ebay, at one point was on an acquisition rampage. And they bought GSI commerce and obviously PayPal and all these companies and they mixed them together in kind of a foul-tasting cocktail, Where they turned around and kind of forced their customers to pay for a bloated service that they might not have needed.  It didn’t taste good, it wasn’t the best anymore, it wasn’t the strongest, it wasn’t the best price. But you got this big SAP type solution. But what we’re seeing is there’s a greater need to… to specialize and focus on specific areas and have a company that are experts at design, user interface design, experts at analytics, experts at development. But together a group of companies we can come together with a solution that will make your solution that you’re offering to your customers, way more powerful, and you don’t have some watered down massive platform. And so that’s what we’re looking to do, Zack. So… we’re looking to acquire two to three companies a year for the next couple of years, which fit that portfolio and then Indaba was the first one. I don’t know if you want me to share a little bit more about that Indaba acquisition?

Zack: [00:19:08] Yeah!

Andrew: [00:19:11] So… I knew Ryan Shields, the CEO of Indaba since like, 2013. And… it was a little too early but we had had a conversation with him about a potential acquisition and it wasn’t until September of 2014 that we were really ready to move forward to acquire companies.

Andrew: [00:19:26] But I had a good relationship with him and I had travelled around the country, met with multiple Magento development companies. And we were looking at Magento first because we had built a Magento practice and we really needed to buy a company that could take over our Magento business and grow it. And we had a great group of customers, really awesome employees that were really experts in Magento. And so for our first deal we wanted to buy a Magento focused agency company. And so we had a couple in the pipeline, we were negotiating deep down the path, but it really wasn’t the right fit in terms of people, founders. It was important for us to have the right management team in place, the right founders because if we don’t truly share the vision together, we were not gonna be able to take this where we want to go. And we ended up going with Indaba because Blake Gindi and Ryan Shields were the right fit in terms of founders of the company. And then their management team was just phenomenal. And so the deal went really fast. We had a lot of same visions. We closed the deal October 1st and announced it. And… since then we’ve already integrated our two companies. We’re now together as one Indaba group and entity in terms of the operations.

Andrew: [00:20:39] And that’s allowed me and the other part of the Cloud Commerce management team to focus on acquisitions because our production is being run by an awesome company, Indaba group.

Zack: [00:20:50] How do mergers and acquisition create value for shareholders of the company?

Andrew: [00:20:54] Good question. I think that mergers and acquisitions as a fundamental principle of business is a good thing if done right.

Andrew: [00:21:03] If we look from the beginning of time, companies have always bought other companies.

Zack: [00:21:07] Yep.

Andrew: [00:21:08] And there’s success stories, there’s failures. But what we see that in this industry is moving so fast that we are absolutely focusing on organic growth through each of the individual companies.

Zack: [00:21:21] Through sales and earnings inside those companies.

Andrew: [00:21:22] Through hard sales and earnings. And, there’s phenomenal growth rates between these individual companies. But the market’s changing and we’re at kind of a pivotal point in this industry which you only see these every so often. I mean… with the advent of the internet there was massive opportunity. 

Andrew: [00:21:30] And our industry is changing so drastically that we’re in one of those other pinnacles right now where we have an opportunity to capture this if done right. So, we’re looking to acquire a few companies a year that can help us grow faster but we’re not gonna do that with a poor strategy of buying exciting companies that don’t have strong sales or earnings.

Andrew: [00:22:04] We’re looking for well-managed, profitable companies that will fit a strong strategic piece of our vision that together between the other companies may have a better service offering for customers or separately they have a lot of exciting growth potential. We are going to continue to grow organically but organic growth alone won’t get us where we wanna go. The market is showing that this is the right time to do this. They’re responding favorably to these types of acquisitions, and it’s exciting because we’ll be able to become something stronger, much faster than if we just tried to grow organically.

Zack: [00:22:40] And doing it carefully and… and consciously so that the wheels don’t come off.

Andrew: [00:22:46] That is a great point you brought up. I mean, some of the biggest failure stories in acquisitions are companies that try to consolidate.

Andrew: [00:22:54] And the consolation process becomes a nightmare. In our case, we were only looking for the first one to really consolidate. And luckily Indaba and Work 9 were so similar in how we worked and in the tools we used that it was a fairly simple consolidation. But for our next acquisitions, there’s really not a plan or a goal to consolidate anything between the other companies. What we’ll end up having is kind of like a top-level management team and process where between the companies we’re able to share leads, share growth, share opportunities. Really look at what are the best practices and then kind of disseminate those between the companies. But other than that, the CEOs of the companies we’re buying, will continue to drive their vision, the execution, the strategy, and the growth. And we’re not looking to consolidate, remove their brand necessarily, take their book of business or lay off their employees. I mean we’re looking at, you’re doing great now, how can you grow faster and become stronger by becoming a part of our family.

Zack: [00:24:00] I’ve always felt like in this industry of services and solutions that there’s an endless supply of business. This endless supply of work to do if you’re willing to do the work.

Andrew: [00:24:12] And these merchants, we’re seeing them leave you know even some of the big players like Accenture because they’re not getting the personalized approach that they’re looking for. And so we have an opportunity as a strong service provider. We’re not necessarily trying to push any one product that we have.

Andrew: [00:24:35] We want what’s best for our customer and it’s not always the same tool or product. So, as a service offering… a service solution provider, we look at what’s best in the best in the industry and we make recommendations for that customer so that they’ll have the greatest success. And that’s why it’s great not having our own proprietary product right now, Because we really do have the customer’s best interest at heart.

Zack: [00:24:57] Interesting. So, potential future deals… how’s the response been on this pitch that you’re making to other solutions providers, other companies like Indaba.

Andrew: [00:25:10] Yeah. I mean, I’m continuing to fly around the country with multiple visits and… [all this is public information], but there is just an exciting number of companies that are interested in this. 

Andrew: [00:25:21] And I think why they’re interested in this is that we all know having gone through the bumps and bruises together, the most successful days for online merchants are holidays. And oftentimes for us, as providers, that means we don’t get to enjoy our Thanksgiving because we are up servicing our customers.

Zack: [00:25:37] So it’s a good way to make money. It’s a grind though.

Andrew: [00:25:39] It’s a grind.

Zack: [00:25:41] It’s laborious.

Andrew: [00:25:42] It’s laborious, it’s a grind, there’s lots of bumps and bruises and so what is exciting is a lot of these companies that we’re kinda targeting right now are in the five to twenty million dollars per year revenue range.

Andrew: [00:25:53] So the next couple companies we’re gonna buy will fall in that range in terms of total gross revenue. They know that to get where they’ve been they’ve lost an arm and a leg, you know. And to get to the next step…

Zack: [00:26:04] (They’ve seen many winters to get there.)

Andrew: [00:26:06] Yeah. And to get to the next step, they’re gonna lose the other arm and leg and that’s probably not the most exciting thing for them to look at, you know. So… they’re at an opportunity where they’re not big enough to go IPO, they’re not really big enough to get acquired by other companies. And so we’re coming to them and saying “we’re not trying to exit you out, we’re trying to give you an opportunity to grow faster than you could on your own, to get more value out of your company than you can get in a private cash, you know, all cash sale, and we want you to enjoy the fruits of your labors into the future by becoming part of our public structure.” Oftentimes that includes a lot of stock. And so yeah, It’s been real exciting. There’s a lot of great options out there. We just want to make the very best decision for the company and for our shareholders. So we’re not going to go too fast. But when it’s the best- you know the right people fit and the right financial structure, then we’ll go for it. We’ll pull the trigger.

Zack: [00:26:58] Exciting stuff!

Andrew: [00:26:59] Yeah. Very!

Zack: [00:26:59] I know you gotta run. You, you have a couple more meetings to get to soon and thank you for jumping on with me. I think all of our audience, which may include other companies in our industry, and our audience may also include shareholders, I think that this is all exciting stuff for people to hear. So thanks for joining, jumping on with us for this interview.

Andrew: [00:27:22] Yeah. Look forward to sharing more in the future. I mean there’s a lot of information that people don’t know about and we want people to know that we’re experts. We understand it. We can be there not only to provide value for our customers, but as shareholders we know where we’re going and it’s really exciting.

Zack: [00:27:37] Good stuff.

Andrew: [00:27:38] Yeah thank you.

Zack: [00:27:38] Alright thanks for joining us.

Andrew: [00:27:39] Thanks, Zack.

To read more about the Indaba acquisition, please click HERE.