AppSumo Horizon: stabilize, expand, then grow

Black Friday is our biggest sale of the year, about 20% of AppSumo‘s revenue. This year we were down 30%.

Every morning the team posted the same update. Didn’t hit the sales target. Next day, didn’t hit the sales target. These were already the lowered targets for the month.

I told them to stop posting it. You won’t always win, though I kind of think you can. But reading it every day was demotivating, literally the opposite of motivating, which is my greatest fear as a leader. The targets are somewhat artificial anyway. Zoom out and deal performance is getting better, refunds are getting lower, sentiment, marketing, AOV, all getting better. The end result isn’t there yet. Our business is quite simple: find an awesome product someone made somewhere in the world, get a good deal on it, and promote the hell out of it. We’re still profitable and we have a great team. Let’s not panic over a number we set in a different month.

Every time things aren’t going your way, it’s one of two problems. You don’t have a plan, or you’re not working the plan. This is ours.

Phase one: stabilize

This year we ran 70 plus deals in January, partners closed, people quit, and AI costs were hard for us to price and hard for partners and customers. Stabilizing means a number of deals a month we can do healthily, which is 30. Standard terms, standard pricing, and rev share that now goes to 50/50 on performance so partners are sustainable. A 10% NOI target. This phase probably runs into Q1 of 2026.

The good part was coming back with fresh eyes. I went to support and said, show me what you do. Partner ops, show me what you do. You ever sit in a restaurant and wonder if anyone who works there eats the food? Our partner contracts got roasted online, and I read them and didn’t understand them either. It used to be, give us a few codes and we’ll take care of everything else. Now there are three forms for financials and about ten for marketing. So go be the customer of your own business, even if it’s a business of one. No product goes on the site now unless I use it and approve it. I’m the bouncer at the AppSumo bar.

We also moved from quarterly planning to monthly, three weeks on and one week off, three priorities a month. November was business, budget, and Black Friday. December is deals, budget, and bets. It feels like getting back into the habit of winning.

Phase two: expand

I have never thought our business could go away more than this year. With AI costs, a lifetime deal is very hard to do. We had a nice run for the first 13 years when there were no costs. Maybe 5% of companies will ever do a lifetime deal. Phase two is offerings for the other 95%, for a customer who is a marketing agency, a solopreneur, a freelancer, a creative with a team under five, and who doesn’t want subscriptions.

So we tested bundles. First one: some partners gave us codes free, some we paid, I priced it at $35 so it would sell out, and it sold out in five hours. We thought we could run that all day long.

Second bundle, really good deals, about 2,000 sold in an hour, and then sales dropped off a cliff. One partner ran a temporary authorization on credit cards, which we normally don’t allow. Another took the product away if you canceled, after you’d already paid. Partners were frustrated, support was overwhelmed, backlash. Third bundle was a Mac bundle. Another flop. The deals aren’t good, the pricing is weird.

How long do you keep trying something that isn’t working? There’s a guy, Shaggy, always happy, always trying stuff. Now he’s doing Christmas lights, it works, and he’s running up the score on it. I said the fourth bundle was the final test.

We got five awesome partners: Reclaim from Dropbox, PikaOS, Bolt and Emergent for vibe coding, and Hostinger. Sean, our CRO, added the FOMO: instead of a flat $69, an early bird tier at $49, then $59, then $69. We launched Friday morning, a little early for Plus and VIP customers, and it took off. We sold seven or eight thousand. We’ve had a lot of L’s this year. This was a relief. And it only worked because the credit card thing and the partner-removing-access thing from bundles two and three were on the checklist this time.

Bundles are now a dish on what we call the partner menu, probably twice a year, Sumo Day and Black Friday, and we’re paying partners to be in them. Other dishes we’re testing: discounts for life (40 to 50% off forever, recurring revenue for the partner, small cut for us), case studies in the newsletter, and limited edition lifetime deals where there are only a hundred so you read the email.

Phase three: grow

80% of the company is on lifetime deals, 10% on expansion, and the other 10% is where the business can substantially grow. The core will grow 10 to 20% by doing the work. The question is what’s the 10x bet.

Three filters: does it have 10x upside, do we want it ourselves, and what’s the actual problem. I’ve built things many times and then gone to convince people they want them. We built a Klaviyo alternative called MeetFam that did your email automatically. I went to friends on Klaviyo and said move over, we’ll do it for you. Nah. Couldn’t get them to use it for free. We built Customer Finder, an AI email outreach tool. Zero people used it. We took it offline.

So December is talking to partners, talking to customers, looking at data. If we can’t get to 100% confidence, can we get to 20 or 30%, so we don’t spend a whole year building something no one wants? Validate before you build. That’s the whole point of Million Dollar Weekend, and I still have to remind myself.

I never blame the economy. It’s such a weak excuse. It’s Trump, it’s Biden, it’s Putin. No. Everyone is still eating. Everyone is still paying for Netflix. Your service isn’t desirable, and you and I have to figure out what is. That’s been my mentality since 2006. When 2008 happened I barely noticed. I went and focused on my customers.

I named this one Horizon because I was in Tucson on a bike trip with my buddy Anton and saw the sunrise. Revenue decline this year has been probably the worst we’ve had, profits some of the worst, and it’s still a healthy business. New site design, new deal page, a team that’s leaner and better than ever. It’s not easy to stay on it when you’re losing, and we’ve lost and won for decades.

The daily miss posts are gone. What replaced them is a plan with three phases and a month with three priorities, and this morning that means 30 good deals for January.

From episode 382 of my podcast, Noah Kagan Presents. Listen on Spotify or Apple Podcasts.