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#6 SubHub Podcast: Vitaly and Olga Urbans

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Vitaly launched his first HelloBaby app back in 2014, when he couldn't make it available on the web. After that, it split into several others, and now Vitaly is preparing for the release Kids vs Zombies.

Olga is developing Moonly, an app for meditation and self-discovery. Moonly is a great example of product market fit and bootstrapping in a very competitive market with impressive results of $250k revenue per month.


The episode is available in Russian on all popular platforms. We also handy picked the most interesting quotes from it and posted them below in English (translated automatically with DeepL).

​​How HelloBaby came to be

Vitaly Urban: We had an idea of an interactive book for kids. Now, of course, it's funny to remember, but back then it seemed like something cool: you turn the pages, like in a book, they shine, flip through. And you have such an interactive album. We were designing it in Flash back then. For the Web, of course. And we wrote that story. It got a lot of buzz, but it wasn't bought. And we thought, "Why don't we do it ourselves? It's cool." Really believed in this thing and started doing it ourselves.

We started doing it. We got really into the web, because we had a lot of experience with the web. I must have done like 200 projects. Tim (Vitaly's partner - ed.) had also done quite a few. And there was an understanding that we were on the same page with the web; we understood everything, all the technologies. What could go wrong? 

But it turned out that when you make a heavily loaded, complex service with a bunch of synchronous queries, sections and so on, when it is not a promotional site, not some information portal, and this super interactive thing, where everything is working on drag-n-drop, everything is flying, animated, we realized that we are generally incompetent. We buried a year and a half of work there, I guess. Changed several frontend teams, internal and external. And nothing worked at all. We were loading up that dinosaur and loading it with code and doing something, and it just kept getting worse. All of our launch dates failed.

Then, out of interest, we tried to make an app. Already out of desperation, I think. And it immediately, not that it flew, but it became prominent. In its Best of the Year by Apple segment, we took it. It got a bunch of fixtures around the world. And that's when we realized we had to invest here.

Vitaly Davydov: And what year was it?

Vitaly Urban: It was 2013 or 2014.

Fundraising

Nikita Maidanov: At what point did you start attracting investment?

Vitaly Urban: From the very beginning, because we didn't have a penny for this project. We first went through our closest friends. We managed to get some kopecks from guys we used to work with in production, but it was very helpful at the time. It was 2 million rubles, super small money. Then we started looking for an angel or a $500,000 fund for a seed round. And we found it in an amazing way. At that time, it was not at all clear how to build a network, how to do all of this. All of these stories with FRII, all of this was just taking off. There was nowhere to go and figure out how to do it. We were pestering our entire network, everyone we knew, and pitched to everyone, saying that we were doing this thing. And we collected feedback.

It turned out that a realtor we knew had recently sold an expensive apartment to his client. He told us: "The man seems to have money. Maybe he might want to invest. Let's have a chat." Took a little runoff in the campaign for that. In a very strange way we attracted our first money, unexpectedly from a business angel, who is not that professional investor, sometimes he invests according to his mood.

From chip overload to focus

Vitaly Urban: We got into an endless loop of fundraising from foundations and more institutional angels. We were raising money, burning it. At the same time they were straightening our brains little by little. People with more experience were telling us what we were doing wrong, guiding us somehow. We tried to figure out for ourselves how we could start making money. We had almost no analytics at the time. We were looking at very high-light stuff: Retention, some conversions. We didn't think about money at all. 

It seemed to us that this venture bubble was inflating actively back then, that we had to jump into it. Especially when we went to the States for the first time in 2015, made about 20 meetings on the first trip there, then there were a few more hits, they completely turned our brains: "Guys, it does not matter at all how much you earn. Look at Facebook, someone else, who is growing an audience quickly, attracts and burns money. Do this." That set us back, I think, two years. We stopped thinking about money altogether, we were engaged in some kind of hype, posts, virality, but we didn't think about economics at all.

Vitaly Davydov: What did investors say about this?

Vitaly Urban: It was bipolar. Some of the more traditional businesses, more mature people, were not happy about this. They said to us, "Monetize now. Do the paywalls, stuff like that." But those who were more from the industry, they were hesitant, sometimes even inclined to say you can still play this venture capital game. There was no understanding there, I don't think, and neither did the investors. It was such a difficult period of transition. Especially when different "Masquerades" and "Prisms" were shooting, such projects wanted to believe in the hype that later this project could be sold to a conditional "Pampers". And there was no need to narrow the audience due to the fact that the service would be paid for. As a result, we began to monetize. 

At some point, we realized that the app was wildly overloaded. When we started implementing some kind of analytics, we saw that people weren't coming to our burger menu at all. Everything that's great there, no one knows about it. And there were basic chips there, the coolest, most expensive ones in development. And we started pivoting into separate apps.

Baby Snap came along, where you make one-second vids about the baby every day. It evolved, became a family chat room. That is, you shoot a snap, underneath it you have a family thread. The trick is that it stays within the family. I mean, you don't post to Instagram or to a group on WhatsApp, and you have that family space so safe.

And there was the App about pregnancy, which then became a staple. It was called "Hello Belly". It started skyrocketing because during pregnancy people have their fears. You want to somehow systematize everything, understand that you're OK. There's very understandable pain here. That's why it works. It's something we've developed a lot later on. Now it's not that loaded, there's a lot of stuff in there. It's optimal there now. There's maternity meditations, shopping lists, symptoms, 3D baby, you can see what he's like now, in 3D, a lot more stuff. This app has suddenly become a staple. 

The others we've pretty much stopped really supporting. We developed them little by little, but we gave all the resources to Hello Belly. It was the app that earned us our first million dollars.

Monetization through advertising

Vitaly Urban: When our pregnancy app started shooting, we tried advertising in it because we wanted to expand our audience. It is clear that not everyone has money (to subscribe - ed.). We were spinning some standard commercials. The problem was that, firstly, greatly spoiled the feeling of the app, the experiment has fallen sharply, because everywhere banners. Also a very frequent case where people just read the advice, maybe go to one more screen of some kind during the day, and that's it. And at that point, it's extremely problematic to show something because you're just killing the only basic experiment with ads.

There was also the problem that the ads were often irrelevant, because the waterfall that's on the nets can't be 100% relevant to our segment. Okay, if there was an ad for some games, but often moms were shown a casino ad, for example. And we couldn't do anything about it. We tried to turn it off, but it still happened. We moved away from that. We realized that we were killing the product. 

But that doesn't mean it was wrong. Now, in retrospect, it seems like we didn't finish that story. You had some guys from Amma recently. They went about the same years down the advertising road. But they've pushed that story as far as possible. They went much further than we did, specifically in the pregnant segment, because they started spot selling advertising, building sales departments all over the world, selling quality advertising, integrating it. They don't have slag. I mean, all their ads are cool. This gave them a huge boost and allowed them not to do hard pavement like we did. I mean, we went back to a tough paywall later and started to toughen it up, which also works, but we very quickly hit our limit. And the guys get an endless market with this approach. That's why we're now also making a pullback in this direction, changing the business model little by little.

Impact of the pandemic

Vitaly Urban: A year and a half ago, when the pandemic started, at the same time there were elections in the United States, and politicians were burning money through the massive campaign on Facebook. Our economy, which was barely hanging on, started falling apart. We managed to make our first million dollars, but we attracted two ones over the years. It has drifted apart a lot, CPI has gone up several times over. We couldn't do anything about it.

We then raised another round, we were about to close it. But it became clear that we ourselves were over believing the story in the moment. We need to change something drastically. We stopped raiding it. Focused temporarily on another project. But now we're back to that story. Our team is still with us. We're already rethinking it. We are trying to implement it.

Vitaly Davydov: You say the auction has grown. Did it grow because of IDFA or some other things? Or because of the elections, politics, all of this?

Vitaliy Urban: IDFA hasn't happened yet. It got spoiled for us, I think, primarily because of the pandemic. There started a very big budget mess, and a lot of people went online. Some businesses started to collapse. Others, on the contrary, grew rapidly. Gamblers started to grow very fast. They began to scrap money very hard. There was a total redistribution of everything. Facebook's algorithms went really crazy. That became a problem for us. Since for almost any startup like B2C in the mobile segment, Facebook and its network is the main channel, we were super dependent. And we broke down at that point.

Running Moonly on My Own Money

Olga Urban: I was very inspired by this journey of discovering myself through meditation tools, through cards, through the wisdom that women pass on to each other. I had such a transition from being an art director for hire at Innova to starting to make a mobile casual game. I still haven't launched it yet, I'll be launching it a little later. At the same time I started to draw this project, a mobile application "Moonly", which has a lunar calendar, runes, and daily affirmations. A little bit later, we started doing interviews. And on the basis of interviews with different masters and practitioners, we created content and articles. Later there was a section with meditations and sounds for meditation.

I did a project that I needed for myself. When I started it, there were few people who supported me in it. There was a very difficult period of no money, when Vitaly supported me completely. And a throw in confidence that I could do some project, which, perhaps, would be profitable. When the designs were already ready, in an unexpected way investors began to come to us through Vitaly, because I did not have a network in this area. One of the investors asked: "Don't you have an astrology application in the field?" That kind of attention from these people immediately made it clear that there was a possibility that Moonly would grow strongly. We launched the app on our own dime.

Vitaly Davydov: How much did it cost?

Olga Urban: I think it was half a million.

Vitaly Urban: Roubles.

Olga Urban: Roubles, yes. 

Vitaly Davydov: This is an important clarification.

Olga Urban: Because we didn't pay the designer, and our developers trusted Vitaly so much and believed in me that they worked for several months just on credit, we paid them later. I spent all my freelance salary on content, writing texts.

Vitaly Urban: I would clarify that we did not pay the designers, because we did the design ourselves.

Olga Urban: Yes, I made the design by myself.

Vitaliy Davydov: So you drew the whole first version yourself? All the banners, all the screens.

Olga Urban: All the illustrations, all the designs. Absolutely, yes. I have been working as a designer and art director for over 10 years, so it was not hard for me to do.

Vitaliy Davydov: So you were working at Innova, you had a difficult period in your life and you were like "I'll make an epic".

Olga Urban: I think it has a lot to do with psychology. I met a psychologist at that time. I started having severe depressions. They pulled me out of that state. I had this kind of opening up, unpacking, and understanding of what I really wanted. And from that point of trust in what I can do, what I like, not knowing if it's going to be successful for other people, I just went on this journey inside myself. Trust in what I want to do. Of course, a lot of people go through a difficult period of transition because you leave your job and you don't know if you can be an entrepreneur. It worked out for us. 

The start-up process hit quarantine.

And that's when I got the keys to the new apartment that I had been waiting for a long time. And we decided to go without investors. We sold the apartment and invested in the project. So we don't have any investors right now. We are very glad that we are free to feel and develop the project without looking back at anyone, without any reports.

Vitaly Urban: It was quite small money, a few million rubles.

Vitaly Davydov: It was just 500 thousand. Where did a few million rubles come from?

Vitaly Urban: We spent it on revisions and initial marketing. That is, in the beginning we made the first version for $10,000. It was quite cheap. That was already affected by the experience. We began to think very much like a startup. We made the first version and were not ashamed to put it out in the raw and start monetizing it. That was a very important shifter for me as an entrepreneur, not being afraid to do that. And literally I went to the Facebook auction, set up all these campaigns myself as best I could. And as soon as we saw that it was catching, that there was some convergence, we already started going there thoroughly. And from the first version of the app, it was clear that product market fit was there. 

"How do you know if product market fit is there?" - startups often ask. My coach says, "You don't, you'll figure it out. If it's there, you'll definitely understand it. That's what happened with Moonly. It was obvious that people had this pain, this need to work with their consciousness, and that there were no normal tools to do that. The tools that were on the market, especially some esoteric stuff, all that stuff about astrology, it was very sad because it was usually done by people without a product backing, without a design backing. And so we decided to bully that side of it. To do, first of all, in a secular way, so that anyone could use it as simple, understandable everyday tools. And to make it look acceptable and stylish.

Vitaliy Davydov: Let's count the money. This is an important point. It will cost the project. You always want to understand where the money is. The first version - 500K.

Vitaly Urban: Yes.

Vitaly Davydov: The design costs zero.

Vitaly Urban: Yes.

Vitaly Davydov: And the rest is development?

Vitaly Urban: Development, yes.

Vitaly Davydov: Does that include the Facebook auction money, the ads that were sent?

Vitaly Urban: Not in this money. It's already in the next ones.

Cooperation with an advertising agency based on Revenue Share

Vitaly Urban: we have already come to the agency Borscht, with whom we have known for a long time, we trust them. And we agreed on RevShare. RevShare model, when they were buying traffic for us at their own expense. And we were cheating on his profits in some proportion. This helped us a lot, because we did not have any serious money to buy it. So we planned it with them in advance. And when the moment came, we came and launched very quickly, briskly.

Vitaly Davydov: Four months passed. Pril has been done, it's gotten better. You came to the agency. What do you have to say or show to convince the agency to work with you on RevShare? Spoiler alert: usually agencies work for the fix.

Vitaly Urban: I show them amplitude, iTunes, Facebook. And they offer to work themselves. We discussed another project with them, some current cases. We work with them on several projects, they know me well. They suggested it themselves. And we started. We were already mentally prepared. But they proposed it, because they saw that we were sharing numbers and opinions in an informal atmosphere.

Vitaly Davydov: Is there a single most important figure, which, if it is, OK? When you go to work on RevShare with an agency.

Vitaly Urban: If it's the same application segment, B2C, mobile, with some content, by subscription, if you take a similar story, not a venture one where you build a technology or grow a big audience to sell it later, but where you make money on every unit, there has to be ROAS 100 at least before you seriously launch marketing.  When you've just done, some prototype, watered down the traffic, you see that it's at least somehow churned out. You have to look there, of course.

Vitaly Davydov: Let me explain. ROAS 100, we mean if I spend $100 on advertising, I get $100 back.

Vitaly Urban: Yes.

Vitaly Davydov: Why not ROAS = 0? Oh, you have to return.

Vitaly Urban: Return on expenses 100%, respectively, 100.

Vitaly Davydov: ROAS 150% is when you spend 20 and earn 30.

Vitaliy Urban: Yes.

Nikita Maidanov: How do you exist now? Is the same RevShare model going on or have you already attracted yourself, are you buying something? How does it work now?

Vitaly Urban: No, we finished the RevShare model. We limited it to a certain period, because there were very cool conditions for the agency, which we offered ourselves, so fat, in honor of the fact that they were not just buying, but they integrated, as a full partner. They're still doing it now. They looked at all the metrics and came up with hypotheses with us. It was like an additional outsourced product. Not just one person, but a whole team that really cared. But that story was limited. And at some point we came to the usual agency commission. Now the guys have a higher commission than the market average. But they are breaking into all the processes and metrics.

How product development happens at Moonly

Olga Urban: We develop very organically. I don't think so, not like many companies. We don't sit around and make something up out of our heads. I read something from the field, something from users' feedback, something that I just know I would like to make for myself, and something is sent to me by the craftsmen we talk to. One woman called me and said: "I'm getting information that you need a tarot section done." I found a master. We've been training our whole team of women for a few months now to understand in depth what it is. And we're going to launch that section a little bit later. These are all spiritual tools. It doesn't matter what they look like. It matters what we put into it. And there are a lot of plans.

We're doing concerts for charity at the same time. We are making a film now. I live in different places with a film crew in forests. We find masters. Someone conducts tea ceremonies in the forest. Someone builds houses of the future that are easy to assemble and disassemble. We are interested in this direction of people who are learning to be closer to harmony with themselves and in harmony with nature, to integrate. We disseminate these ideas on absolutely any creative level we can. Let's say making a film: they just come into the field and start doing it. I'm not ready for that either. I'm learning all the time in the moment. So here we both develop the product and do different interesting things in parallel, which we then also integrate as some unique events into the product. People like that. We see a lot of feedback and gratitude. People write that it changes their lives. First of all, it is probably because I myself dig very deeply into my own pain, and then we accumulate this information and pass it on to people through different channels to help them.

Web Subscriptions

Vitaly Davydov: That's interesting. What do you think about creating a web version, for example? I'm not talking about web subscriptions, I'm talking about a full-fledged web version.

Vitaly Urban: Absolutely no thoughts. There is no sense at all. The only thing that works is the cell phone: get a push, come in, read something, get an affirmation for the day. We have these really cute, parallax, cuddly ones now. It's always such an intrigue. It's always a clear user flow. It's unobtrusive, handy, always in your pocket. Bringing this to the desktop is a very obscure story. Maybe I have some trauma working for me right now with "HelloBaby," but I still don't believe specifically for such a consumer product on the web. It's not buying tickets, it's not even reading books. It's the kind of portioned content that needs to be timely, daily accessible, easy. I do not believe in web.

Vitaly Davydov: Do you believe in web subscriptions?

Vitaly Urban: I definitely do not believe in web subscriptions. Not in our segment specifically. Not in general, but specifically in our segment. If we are talking about some kind of an expensive product, some kind of a piece of history, buying tickets, it works. With us, you lose more effort on that. We've played the "HelloBaby" game before just when we were doing some promotions, doing web pages. We used to put Stripe on there. And it seems to be easy and nice to pay in Stripe, but, nevertheless, the conversion rate is not only lower, but they tend to zero. It's 50 times lower than on mobile, because on mobile you put your finger or your face, and that's it, you've paid. It's a completely different level of parting with money.

Vitaly Davydov: Like, when you enter the card, it's a hard stop.

Vitaly Urban: Yes, of course.

Vitaly Davydov: And in general, if we talk about consumer prizes)?

Vitaly Urban: It may work for some people, for sure. When I signed up for book service, I was not too lazy to go to their site, enter the card. Not even because it's cheaper, because I'll pay less to Apple and more to the developers. That's my professional distortion. Or it just happens to be cheaper. Or I just can't be bothered to pay on the web. If it's something expensive, I probably don't care. But some kind of consumer products everyday, I think it's just a cell phone.

About gut feeling

(We're talking about a game for kids where they fight zombies. The game is getting ready to launch, ed.)

Vitaly Urban: Speaking of intuition. In January this year we should have had a release, after two years of development, very complicated, expensive, 30 people working all the time. At the last minute, Gordey just felt that the characters we made, which are not unique, but just these kids with different skins, that it wasn't going to work. It's all screwed up if we do a release like this now. As we remember, Hit or Miss, there are no second chances in the game. When you go global and fail, you fail. And we recreated everything in a few months. Literally, in four months we re-figured the whole game. We made unique characters, each with their own story, their own abilities. And now you're not just pumping up an abstract child, but a specific character that you love and associate yourself with. They all have characters. One's a sleepyhead, he likes to sleep. He has a pillow, antidepressants. The other, he has a split personality, he lives inside a shark. And he speaks in the boy's voice, and then he switches to the shark's voice. They communicate with each other somehow. He has these sub-personalities that come out.

We've made a lot of these kinds of gags in the game. The idea of the game, the philosophical idea that all adults are zombies, they live in their patterns and programs. Only as a kid can you let go of that, live for real. Goofing around, throwing poo, freezing someone up, doing stupid things, complete wildness. That's what we want to get across. And it worked very cool. I remember a conference in Berlin a couple of years ago where we had another round of raises. We had a lot of rounds there. And a very boring, typical Russian investor came in. He is gloomy, sad, dissatisfied with everything. This is always very contrasting at foreign conferences; you can see Russian investors right away. And his sadness immediately went away when we offered him a game on the net and Gordey threw a poop at him. And he got shit all over his screen. And it was such a genuine smile and joy. After that, it was impossible to tear him away from his smartphone. We believed in the project even more then.

How much does it cost to make a game

Vitaly Davydov: How much does it cost to make a game?

Vitaly Urban: A game of our genre, we have a 2D shooter, but it looks like 3D. It's quite a unique approach, saves a lot of money on production. Right now we've already burned through $2 million in three years. In principle, very economical.

Vitaly Davydov: Wow.

Vitaly Urban: To take similar projects abroad, it is just pennies. Because we have a team in St. Petersburg, we do not stand as a team in LA. And now we're raiding two more to run it all globally already. Right now we have softlunch Ukraine and in early access in the rest of the world.   

We have already achieved good metrics, in principle, everywhere. We have even 4% conversion to payment in the States, because there is no store yet, in fact, there are only promo-offers. There are already all the metrics for success. It's already obvious that everything is in place for success. If we don't screw up hard somewhere now, we'll be fine. We will raise more money for the global skail and for marketing.

Vitaly Davydov: Holy shit.

Vitaly Urban: It is expensive to make a game, yes. When you make a real time shooter where you have people playing online, it's a very complicated story technically. We were hiring very cool people with great difficulty. We recruited them from other companies. With a lot of experience. We have an unreal CTO. And the rest of the team is also unreal. I'm just amazed at what they do, how they figure it all out. The way the surrealization of gameplay in multiplayer works is some kind of metaphysics. I don't understand how it all works at all. I just admire it. It's very complicated, very expensive. But on the other hand, having made this game, we can reuse all these technologies at home. Basically, all the money we raid, we raid not into the game, not into the title, but into the studio that is building this universe of children against zombies. This universe can have many different titles in different genres. We even have a slide in our presentation about what could be a series on Netflix. We've even already sketched out how it could be. Because you can work with that IP already far beyond the game.

Nikita Maidanov: Didn't Apple Arcade come out for you? How does it work at all with such services?

Vitaly Urban: I don't know exactly, but we have a feeling that Apple Arcade is a graveyard of projects. That is, those who couldn't make their own money on subscriptions and purchases go there. Because you certainly can't make much money there. It's a cool indie story. But if you feel success on a normal, full-fledged economy, I wouldn't go there.

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Nadya Pominova
September 13, 2021