online questionnaires

SurveyMonkey turns online surveys into a hot business

September 15, 2011: 5:00 AM ET

How CEO Dave Goldberg boosted his company's bottom line with more paying customers.

Goldberg's strategy: more features

FORTUNE -- Dave Goldberg, a pioneering Internet music entrepreneur, used to have a glamorous job as vice president of music at Yahoo (YHOO), which bought his startup Launch Media for $12 million. Now, as CEO of Palo Alto-based SurveyMonkey, he peddles online survey tools to corporations, schools, and community groups. "A lot of people ask me, 'Really? Surveys?'" says Goldberg.

Really. It turns out that those prosaic online polls are a tidy business, thanks in part to a management and technology upgrade instituted by Goldberg -- who is married to Sheryl Sandberg, the ultraconnected and savvy operating chief of Facebook. Since becoming SurveyMonkey's CEO two years ago, he's tripled the company's registered users to 8.5 million, more than four times that of its nearest competitor, Zoomerang.

SurveyMonkey, founded in 1999 by Ryan Finley in a Madison apartment, has always been profitable. Finley ran the company on a shoestring; he didn't hire his first employee -- his brother, Chris -- until three years after launching, and he took no outside financing until he and his brother sold a majority stake to Spectrum Equity Investors and Bain Capital Ventures for an undisclosed sum in 2008. (The Finleys sit on SurveyMonkey's board.)

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Goldberg, who became CEO when the deal closed, saw an opportunity to lure more paying customers. Anyone can use its basic service free, but hard-core users can sign up for subscription plans ranging from $17 to $65 a month that include extras such as telephone support and the ability to brand surveys.

Goldberg beefed up the company's premium offerings -- SurveyMonkey's paying subscribers now have access to a bunch of new tools to help analyze results. Along the way, he increased the staff from 12 to about 100, expanding engineering, support, and management.

The strategy appears to be paying off: Today people in nearly 200 countries respond to some 33 million surveys produced by SurveyMonkey users. Its customers range from small firms to retailers such as Lands' End, which uses it to poll customers (How do moms balance cost vs. quality?) and employees (Where should the company host its picnic?).

Goldberg declines to disclose sales, but the company recently refinanced $100 million of its debt, a transaction that suggests an annual cash flow north of $35 million. "It's an incredibly efficient business model," says Jordan Rohan, an analyst with Stifel Nicolaus.

As Goldberg looks for new ways to expand, he has an invaluable resource in Sandberg, who has opened their Atherton home to dinner guests from Bono to Rupert Murdoch. And while Goldberg says their companies don't have a special relationship, perhaps it is not surprising that SurveyMonkey's newest release is an app that runs on Facebook.

This article is from the September 26, 2011 issue of Fortune.

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