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How Zencoder became the largest cloud transcoding service on the market

Last month, Zencoder encoded over 2 million videos. We're pretty sure this makes us the largest cloud transcoding service on the market. Some interesting facts:
  • Our transcoding volume is more than 1% of YouTube's volume. We're doing a few percent, in fact. We think that's pretty cool.
  • Over the last 12 months, we've grown by 15x. Since our launch 18 months ago, we've grown by more than 20% month-over-month.
  • Based on public information, we believe we're the largest cloud-based encoding service around. By about 2x.
Before we get ahead of ourselves, we're still small, all things considered. We're operating in a competitive, quickly changing industry. In other words, we're still at the beginning of the marathon. But now that we've been operating for 18 months, it's interesting to stop and reflect on what has contributed to our growth, for better or for worse. Looking back, here are the three things that most contributed to our success.

The most important thing you can do

When we started Zencoder, we had a huge advantage: we'd been in the cloud transcoding space before. In 2008-2009, we built Flix Cloud, an early cloud encoding service, as a partner product with On2 Technologies. Through that process, we were able to talk to dozens of real-world customers. Talking to customers isn't optional. It's the most important thing you can do as a startup founder. We're big fans of Steve Blank and Customer Development, and one of his central themes is that startups actually don't know anything. Startups have hypotheses, not facts. If startups had facts, they wouldn't be startups anymore - they'd be mature companies executing on proven business models. But in reality, in any emerging industry, most things are unknown, and the answers aren't in the founder's head - they're outside the office, in actual user behavior. Before we wrote the first line of code, we talked to dozens of customers. We cold-emailed video publishers and bought them lunch. We did Skype calls with friendly contacts at media companies. And, of course, we had the benefit of talking to customers during the Flix Cloud days. This gave us deep insight into the needs of our customer base.

Love your customers

Early on, we decided to focus on selling to engineers. We did this for two reasons. First, we had a theory that the right way to build a cloud-based service over the long run was to focus on making developers happy, not making VPs happy. Our model was AWS: Amazon Web Services grew from the bottom up, not the top down. There were 100,000 passionate Ruby and Python hackers talking about AWS before the first VP said "We need a cloud strategy" (whatever that means). We figured that we would have an easier time getting into the enterprise through the Engineering department than through Business Development. In retrospect, this was often true, but not always, and we've since revised this hypothesis a bit. And we don't only sell to developers - we now work with large enterprises, major media companies, and broadcasters. But even with enterprise customers, our approach is that of a technology company. Zencoder is great technology first, and slick enterprise sales second. Second, we're engineers ourselves, and so we know how engineers think. This made it easier for us to sell to them. Engineers like well-designed APIs, responsive support, and products that Just Work. Engineers don't like buggy software, "Call for Pricing", and marketing BS. When you're a developer, selling to developers is awesome, and we love doing it. It's always easier to sell to yourself than to someone else. What's more, developers on the whole are a good bunch. They're smart, honest, and fair. When you screw up, they tell you, and when you do well, they tell everyone else.

Know your DNA

A startup can't do everything well. Time and resources are finite, and we all have to prioritize some things over others. These choices become the DNA of a product. Apple's priority is design. It's not that Microsoft, Dell, and Google think that design isn't important - all things considered, everyone wants good design. But design is at the core of Apple's DNA in a way that is true of very few companies. This affects every product Apple makes. Apple's products aren't always the fastest, the most advanced, or the most feature-rich. But without fail - almost - Apple's products are brilliantly designed, and their competitors feel clumsy by comparison. Google is still young, but I think its DNA is engineering brilliance. Oracle's DNA is sales. Wal-Mart's DNA is low prices. Microsoft's DNA is in flux. At Zencoder, we decided early on to emphasize customer happiness. We don't just want to transcode videos. We want to transcode videos so well that customers notice, get excited, and tell their friends. This has two components to it. First is performance: things like processing speed, reliability, and video/audio quality. If we're slow, if we can't handle a certain file, and if our output looks bad, our customers won't be happy. Second is customer support. We tapped one of our core engineers early on to focus on support, and this was one of the best decisions we made. He's a real engineer who knows the Zencoder stack from top to bottom, and he usually answers customer email within minutes, not hours. No matter how well our product performs, if customers have problems and encounter a support black hole, they won't be happy. Focusing on customer happiness has precedent. For example, Zappos showed that customer happiness is powerful marketing driver. Customer Development teaches that startups should spend serious time talking to customers. And if Y Combinator's unofficial motto is "Make Something People Want", the First Derivative of that motto is "Make Users Happy." This focus has several benefits. First, happy customers are good marketing. When customers like something, they tell their friends. Second, it focuses product development in the right direction. In any startup, there are always a dozen important things that need to be done. If you choose between them by asking "What would make customers happiest?", you'll generally make a good decision. And third, making customers happy makes a team happy too. Employees are generally motivated by significance and recognition, even more than by simple things like money. And when users are happy, a team receives recognition and work feels significant.

What's next

While 2011 has been a great year, and we're excited to be the leader in cloud-based encoding, this is really just the beginning. Our industry is changing quickly, and if we get complacent and stop innovating, we'll be overtaken before 2012 is out. So in 2012, look for four things from Zencoder. First, major feature improvements that let us take cloud transcoding to places where it hasn't gone before. Second, fundamental changes to the structure of API-based media processing that have huge benefits. Third, complimentary products that our current customers are asking for. And fourth, a continued focus on performance, reliability, and quality, such that our 2012 product makes our 2011 product look weak by comparison.