There’s an awkward moment at the end of almost every dinner Strawhouse co-founder Jason Kryski has with a client. The typical agency-client dynamic sees the agency pick up the cheque. But Strawhouse’s relationships aren’t typical. “Our customers are always trying to buy for us,” Kryski explains. “I think that’s demonstrative of the value we drive for them.”
Strawhouse’s core business delivers performance-based marketing (also known as affiliate marketing). The firm is a relatively new player in the multi-billion-dollar industry of persuasion, in which a company develops and executes another company’s marketing strategy in exchange for a commission on each customer or sale that comes from the arrangement. Not yet four years old, Strawhouse has become very good at it in a very short period of time; its sales grew 3,034% in the past two years, to well above $50 million, earning the company the No. 1 spot on the 2017 STARTUP 50 ranking of Canada’s Top New Growth Companies. Situated in picturesque Kelowna, B.C., it’s both off the beaten path and under the radar; there’s a good chance you’ve never heard of it. That’s by design. Strawhouse believes the best way to grow its business is by aligning its success with that of its clients—and giving them all of the credit.
Kryski came to the world of affiliate marketing in 2008 as an energetic, but unfocused, young man. The curiosity of the self-professed tech nerd had been dulled by stints trading stocks online and selling vacuum cleaners door-to-door. A “dumb luck” encounter with a friend working in the marketing industry changed everything.
Inspired, he set up Adswine, an email marketing business, and connected with the man who would become his Strawhouse co-founder, Naveed Ramadan, at an online forum for affiliate marketing professionals. The two men shared an interest in this nascent form of targeting clients. They also, by sheer coincidence, happened to live in the same Kelowna condo building, a few floors apart. Ramadan, a fellow tech whiz who grew up in Mississauga, Ont., had been earning a tidy living offering search engine optimization to the affiliate marketing pros he met in the online forums. But he was growing weary of what he calls the “cat-and-mouse game” of SEO.
The more Kryski and Ramadan talked, the more they saw potential in social media platforms, with their abundance of user data, as far more effective drivers of affiliate revenue than traditional emails. “Sending a million people one thing and seeing what happened didn’t make a lot of sense to me,” Kryski said. “It wasn’t a very person-centric approach.” As Facebook ramped up its advertising platform with improved data access and customer targeting, Kryski and Ramadan decided to pounce.
They started Strawhouse in the fall of 2013. Kryski assumed the traditional CEO duties, while Ramadan acts as a COO, providing a measure of pragmatism to Kryski’s ambitions. From the outset, the goal was to use technology to do things differently, to create what Kryski calls “a personalized post-click advertising experience.”
That experience centres around software—built by a team of engineers led by machine-learning expert Giuseppe Burtini, the company’s director of technology—that leads users clicking ads on Facebook or Google to different places, based on data collected from browser cookies. For example, clicking on an Ikea ad might display dorm-room furniture to a student in their early 20s, while the student’s parents might click that same ad and be shown higher-end residential items.
Strawhouse’s target clients are businesses with between $2 million and $5 million in annual sales that have both mass appeal (“We’re interested in things that can be marketed very broadly, like to 10% of all Americans,” says Kryski) and aspirations to grow aggressively—at least tenfold. It might seem unconventional to court smaller ventures instead of giants, but Kryski and Ramadan say these conditions allow their team to really catalyze the kind of growth they feel is central to their value proposition. It seems to work, so far: among the fast-growing businesses Strawhouse has helped to accelerate sales are Austin, Tex.-based supplement firm Onnit, Los Angeles-based organic food e-tailer Thrive Market and Montreal breakfast food subscription startup Oatbox. One explosive Facebook campaign—for a U.S.-based probiotic—was so successful its manufacturer had to scramble to find factory space to meet the increased demand.
Facebook is massive for Strawhouse. For a brief time, Kryski says, their company was the third-largest video advertiser on the social media platform. Today, Strawhouse claims to be Facebook’s largest Canadian-based advertising partner. The alliance has its perks, providing deep insights into how to best use the platform and, Kryski says, “the ability to talk to a lot of smart people who are interested in growth.” But it has also forced them to make sacrifices. For instance, in March of this year, Facebook decided to stop accepting ads from certain businesses, including several Strawhouse clients in the natural supplement space. For Kryski and Ramadan, it presented a dilemma: side with their customers, or side with the platform on which their success had been built. They chose the latter, and ended up dropping two-thirds of their clients. It came down to an “alignment of values,” Kryski says: “Facebook’s always been a terrific partner of ours, so we chose to stick with them.”
Most companies would be quick to advertise big wins, but the unassuming Kelowna company not only prefers anonymity, it’s become part of the business model. “We’re in the background just making it look like these companies are blowing up,” Kryski says. “And we kind of like it that way.”
“The anonymity is a clever, clever play, and it’s not just a play,” says Kyle Hitchcox, co-founder of Victoria-based performance marketing company Helmkin Digital. For clients seeking discretion, he says, it’s a selling point. And for prospects, the quietly confident approach stands out in a crowded space of “very loud” players, Hitchcox says. “It creates draw. It creates mystery.”
As Strawhouse grows, it’s investigating new revenue streams—each meant to deepen its mandate as an unassuming growth tool for clients. Its software engineers have developed a dashboard that pulls in revenue and ad spending data to better understand how each user should be valued and budgeted for. Until now, that technology was used internally to provide data to Strawhouse copywriters, digital media producers, designers and media buyers to use on client projects, but Kryski and Ramadan are considering spinning it out into its own business. The firm has also introduced contracts that give it the option to buy equity in client businesses if campaigns meet growth targets.
The business is fast expanding beyond its bucolic Kelowna home. It’s opened small offices in New York, Los Angeles, San Francisco and San Diego, with more to come. “I wouldn’t ever put a limit on the growth of the company,” says Ramadan.
Kryski argues that, as technology accelerates and as ecommerce grows more competitive, the company’s services will be indispensible—and lucrative. “Over the next two to three years, there’s going to be a convergence of the kind of data that’s out there, and the advertising experiences that people will have are going to feel more and more natural,” he says. “It’s going to be harder and harder to not buy things.”