What’s In Peter’s Head

Recap of My Experience at TechCrunch50

I was fortunate this year to attend the TechCrunch50 conference in San Francisco.  It was a little bit of an odd fit for me because GeekStack isn’t ready to demo, so we weren’t presenting, and in current investment circles, you need not only a proof of concept project but also some market traction in order to get serious interest from investors, so I didn’t pitch much either.  I just used the conference as an opportunity to meet people, network, have fun, and see some new tech companies.  The whole conference was kind of up and down for me, so I’ll put the highlights in a non-chronological, roller coaster format.

GOOD: My GeekStack t-shirt was ready and shipped in time and it looked great!

BAD: My sample card/business cards did not get shipped to my house in time for me to bring them with.

GOOD: Debbie at the 24 hour FedEx Office location on Blossom Hill Rd in San Jose helped me print some improvised cards on glossy cardstock and cut them to size.  They didn’t look as sharp as I hoped (the sides weren’t aligned right so I got some funky borders) but they were in my hand and not so expensive and they were a hit with the people I gave them to.

BAD: The Japanese guy who parked next to me couldn’t figure out how to get his demo materials out of the trunk (he had a valet key)

GOOD: I showed him how to fold down the back seats and his morning was saved.

BAD: There was little to no AC in the convention hall and 500 people + 499 laptops quickly made the room uncomfortable and thus began 2 straight days of wiping sweat from my face every 5 minutes.

GOOD: Some of the companies were really awesome!

BAD: My eyes glazed over every time someone started talking about advertising or social media (that was a lot).

GOOD: Lots of people think adding game-like features (leaderboards, levelups, scoring, etc) is a good way to motivate people to use their apps.

BAD: This will get overused and people will get sick of it.  Do I hear “Web64″ coming?

GOOD: The judges on day 1 were awesome!  Yossi Vardi kept the audience laughing and kept his fellow panelists from being too stuffy in the morning, and Paul Graham asked on or two oddball questions that kept all the startups on their toes.  The day 1 afternoon panel of Marissa Mayer, Roelef Botha, Marc Andreesen, Paul Graham, and Tony Hsieh was flat out impressive.

BAD: I didn’t really care for any of the day 2 judges.  Partly they were boring, partly I was tired, and partly the heat sapped the enthusiasm out of everyone.

GOOD: RedBeacon did a very impressive demonstration of their product that included delivering 500 cupcakes to the audience (delicious, sweet delicious cupcakes at that).

BAD: Judges kind of skewered them because while they did an effective demonstration, they didn’t answer the key “chicken and egg” problem they faced.  pg coined an useful rule: “If you have a chicken and egg problem, you should spend the bulk of your presentation explaining how you will deal with the chicken and egg problem.”

GOOD: The RedBeacon guys are super sharp, did have answers to the concerns the judges expressed, and ended up winning the whole kit-and-kaboodle of the TechCrunch50 prize, the $50K, and $1.3M in advertising, a ton of pub, plus the last sumtuous laugh.

BAD: iMo came out with a high energy demo, dressed in a racing suit and helmet with “Eye of the Tiger” blasting . . . and he had a tech glitch so his demo didn’t work.  Despite vigorous applause and encouragement from the crowd, led by Yossi Vardi, he couldn’t get it working in time and they had to move on.  Keep in mind that this is a 20 year old kid who came from India by himself.  It was the most heartbreaking thing I’ve seen in a long time – it was like watching a basketfull of kittens get fired from their kitty jobs and evicted from their basket.

GOOD: iMo returned in the afternoon to thunderous applause and demoed his iPhone app that lets you use the iPhone as a controller for PC games.  He used it as a steering wheel for a racing game (in red racing suit and helmet to “Eye of the Tiger”, a joystick to control a flight sim (in a flight suit to “Danger Zone”, and to control a thug shooting up a house and throwing a grenade (in baggy jeans, a tank top, and swinging a baseball bat at a Sequoia VC to the tune of “In Da Club”).  He brought the house down, and even though the judges didn’t think there was much of a business, they were all intrigued because he was so gutsy to fail, come back on, light up the crowd, and electrify the whole audience.  He ended up winning the Best Presentation award.

BAD: Did I mention it was hot?  I tried really hard to care about what was going on the second day but I couldn’t sit in the main hall for more than 30 min at a time.

GOOD: I got to meet people in the exhibition space, played with a MSFT Surface table, played Beatles Rock Band (but the yellow drum pad didn’t work so I kept losing) and found some more of RedBeacon’s cupcakes.

BAD: I didn’t win the free iPod that SalesVu was raffling off, but I did get to see the SalesVu demo – Point of Sale Software as a Service.  I probably didn’t get all of the finer details, but it’s a point of sale terminal and app for restaurants for $1K instead of $10K it usually costs.

GOOD: Lots of people gave encouraging words about GeekStack and a couple of people wanted me to get back in touch with them when we have a demo.

BAD: I found out about Challenge Games, a Sequoia-funded company with $15 million and a team of cagy internet gaming veterans.  Their CEO wrote the first book on online gaming communities.  He wrote the freaking book.  This knowledge put me into a little bit of a tailspin because my whole “no one else is doing trading card games online” myth went up in a FAT pile of smoke.  Challenge looks awesome and I felt like the fat kid with no date to prom after looking at their site.

GOOD: I had a nice alcohol-fueled chat with some cool guys from Spawn Labs during the cocktail party who thought GeekStack was AWESOME and that I should be glad that Sequoia funded someone, because Sequoia investments tend to precede huge success.  What better kind of validation could you ask for?  This especially meant a lot because they had an awesome demo themselves.

BAD: I had to leave early to walk to catch BART to SFO.

GOOD: I found a group of guys driving to the airport, and one of them lived in the dorms with me in my freshment year of college.  Hadn’t seen each other in 12 years and we met in the TechCrunch parking lot.

BAD: The fast ride to the airport meant that I had over two hours to wait for my red-eye flight.

GOOD: I had time to write this report of a great trip!  Thanks to everyone at TechCrunch50!!

Summary of thoughts on the startups:

Ones I’m most excited about as a consumer: AnyClip (find any clip from any movie), Clicker (the ultimate guide to TV on the internet), Spawn Labs (play console games one any PC over broadband), iTwin (plug and play folder sharing over the internet – like DropBox but with a dongle instead of a download) and StorySomething (personalized bedtime stories delivered daily to iPhone).

Interested in as a business customer: Yext (pay-per-useful-call), CrowdFlower (Like the RightScale of Mechanical Turk).

Most likely to be an enormous, economy-changing company: RedBeacon.  The judges nailed it with this pick.  There’s a lot of work ahead and the usual ways to stumble and fail, but they could be as big as the Yellow Pages mixed with eBay.  And as I mentioned, the guys couldn’t be nicer or sharper.  In 10 years I’ll be saying I knew them when they were just starting out.

Posted in Startups | No Comments »

Why You Should Watch TWiST (and what’s so special about episode 13)

[FULL DISCLOSURE: I've called into TWiST and received great benefit from it and will be a fan forever because of it.  Also, although I've wanted to write about TWiST saying many of these things for a while, he is offering an iPhone for the best review, and that offer kicked me into gear.]

If you’re like me (and let’s face it, since you’re reading my blog, odds are you’re like me), you’re probably what I’d call a Hacker News Entrepreneur.  By that I mean someone who probably grew up with computers, love them, have been programming for ages, maybe studied CS, and have an interest in starting a tech company.  Hacker News, a community news website run by Paul Graham and YCombinator, is a fantastic place for people like us.  There’s a mix of tech and startup related articles with some of the smartest and most civil discussion you’ll find anywhere on the internet.

If you read Hacker News a lot, you can’t help but have some of pg’s startup philosophy rub off on you.  Some aspects of this include quick iteration, incorporating user feedback, making things simple to buy and use, and taking something valuable but difficult and democratizing it.  The cornerstone principle and motto of YC is “Make Something People Want”.  A side effect (or maybe driving principle?) of this is that there’s a tendency towards having many small customers who require little support or interaction to get value from your product.  This does NOT mean pg discourages customer service – it just means you should make your offering so simple, intuitive, and well explained that most of your target market can figure out how to buy and use it without your help.  Indeed, not only do YC companies have wonderful products, they provide the fastest, friendliest service I’ve encountered on the Internet.

This mindset and strategy is extremely alluring to computer nerds like us because we have a stereotypical (and let’s face it, well deserved) reputation for social awkwardness.  For us, networking involves IP packets, not business cards.  The media is something you burn isos on, not court for attention.  Speak softly and let your code do the talking, etc.  For people like me, Jason Calacanis comes off as a braggart, a schmoozer, a suit, a talking head, etc (I’ve heard worse but I’ll leave it at that).  It seems to my kind that he cares more about the press than the product, more about promoting himself than creating value, that he’s got more hot air than great ideas.  I know that before I started watching his new show This Week In Startups, this is the impression I had of him.

What changed?  Lots of time watching listening to him talk and work.  (And I do mean lots.  Through episode 13, I’ve probably watched 25-30 hours of Calacanis TV.)  The impression I described before is a caricature created by people who don’t know or don’t like him.  Anyone can be caricatured – let’s do one of pg for fairness sake.  This is a guy who sneaks around college campuses, encouraging people to quit their education and give him the fruit of their labor in exchange for the coins he has in his pocket.  He’s telling the children (the children! Think of the children!!) that sleeping on couches and eating Ramen is the key to success.  Ridiculous, but with a grain of truth, just like all caricatures.  Given the chance to see anyone for who he is and getting to know what they actually do lets you form your own image of them.  And I saw that he’s an enthusiastic, generous, hard working, just plain cool guy.

The grain of truth behind Jason is that he is a hustler, in the very best sense of the word.  He makes things happen.  His gift is in always making something happen.  The contrast is striking on TWiST between the tentative callers unsure of how to express themselves and Jason’s fast talking, confident snap decisions.  There were a couple times when a nervous entrepreneur described their project to him and he offered to invest in them on the spot.  He’s often trying to move the conversation along when someone is belaboring a point that has already been made.  He’s a talker, a communicator, a catalyst.  He makes things happen in the real world.

That’s the key reason why all Hacker News Entrepreneurs should watch TWiST: For people most comfortable talking to a compiler, TWiST is your admission letter to Sales, Marketing, and Media University.  You’ll pick up a ton just from the stories he tells, the way he interacts with people, how he manipulates the media, and the advice he gives.  For instance, he demonstrated how to push peoples’ button to get attention when he made a PSA against Apple Fanboys that got a ton of attention.  It’s hard to describe, but you’ll know it when you see it.  It might not be your style (it’s certainly not mine) but it is eye opening and even if you don’t do everything he does, you’ll be a better entrepreneur if you’re aware of all the tools he showcases.

In Episode 13 (from August 28) he used several of these tools.  Every week he dhows how to advertise by example but this time he was more explicit about what he was doing.  Several times throughout the show he has a sponsor break where he has everyone on Twitter thank the show’s sponsors.  This starts with the couple hundred of people that watch the show live and then there’s a long tail over the next couple weeks as people download and watch the show on their time.  This gets a ton of tweets for the sponsors and cements them in the viewers’ minds since he gets them to take action in response to the ad rather than listen passively. (BTW, thank you to DNAmail, Ustream, WebSpy, and Audible!)

Another lesson (it really was a lesson, he prefaced it and everything by saying “I’m going to teach you marketing”) was about intelligently using money for marketing.  He had three contests for three different purposes.  First, he offered a $500 Apple gift card to the person who wrote the best review of the current episode.  This is straightforward marketing (using money from one product to market the same product) but amplified by the contest.  Next, he used one platform to promote two others.  He offered a Mahalo prize pack, a schwag bag with a Mahalo hat, beach towel, mug, iPhone case, etc to the first 100 viewers to see the movie We Live In Public that a friend of his made.  Finally, at the end of the show, he gave the promotional ad for audible (50% off first 3 months) and then chipped in $1000 of his own money to cover the other 50% for the first 50 viewers.  This was adding money to increase the value to the sponsor (people signed up faster – 7 signed up before the end of the show), increase the value to the viewers (by $1K) and increase the value to his show (because more people are participating in it and will talk about it).  So in a couple hours he showed three different ways to amplify marketing dollars and get the most attention and action for your buck.

There’s no way this next trick would work, not on savvy readers like you.  You’d never fall for an inflammatory statement that manipulated you into action would you?  Twice Jason use that trick.  First, when announcing the episode review contest, he said “I don’t know if this will work.  Probably only 5 people will do it.”  I wrote in my notes right then “Fat Chance”.  I suspect Jason knew exactly how that statement would motivate people and I just want to know how close his estimate was to the final number of reviews.  Second, when talking about We Live In Public, he called out anyone that considers themself a social media guru and said if they don’t see this movie, they don’t know anything about social media.  I’m sure this caused a lot of people to bristle and say “I’ll show you Calacanis, I AM a social media guru.  I’ll see your little movie.”  And they will.  And the beauty of it is, Jason got them to do what he wanted, and he doesn’t even know who they are! Watch and learn.

Enough about Jason, what else can you learn from the show?  Every week Jason and his guests answer questions from listeners who call into the show.  It’s a great opportunity for rookie entrepreneurs to get advice from two or more veterans, and the questions have covered a wide range of topics.  They spend 10-20 minutes with each caller so there’s a lot of quality discussion.  For instance, this week someone called asking about doing a consumer electronics startup, and another person asked about tips and pitfalls when consulting for a big company.  Previous calls have been about what to do if you’re have a family but want to do a startup, what to do with a stagnant product that’s no longer competitive, and many more.  All of them have been interesting, and if your topic comes up, it’s pure gold.

Something that debuted this week was Jason’s Shark Tank, where people call in with a two minute pitch.  After the pitch, they receive a critique of their product and their delivery.  Jason is even looking to angel invest in pitches he likes.  I don’t think they’ll ever settle an investment on the air but I wouldn’t be surprised if he does invest in some of the people that call in.  The first two were about a Digg for emotions, and a LinkedIn for teens (they both sounded better than the 3 words I gave them).

The biggest single part of each show is the interview.  Because of his media background and the fact that he’s in Los Angeles instead of Silicon Valley means that he gets a different set of guests than the usual Silicon Valley faces.  This week was Matt Mickiewicz, founder of SitePoint, 99designs, and Flippa.  Like most of the interviews, he talked about his life and entrepreneurial background, current projects, future plans, and tips for aspiring entrepreneurs.  I hadn’t heard of any of the guests before they came on the show so it’s refreshing to meet a whole new set of faces.

So after 1,700 words mostly praise (with the occasional backhanded compliment), is there anything I don’t like about TWiST?  The biggest drawback (which is also a strength) is the length of the show.  Most shows are about 2 hours, with some crossing the 2.5 hour mark.  I dread the day when there’s a Return of the King length episode what makes my iPod catch on fire.  On the other hand, the content is all entertaining and valuable, so I consider it an investment.  You really have to care about startups or the show just won’t be worth the time.  But if you do care about startups, consider it a free survey course from the University of Mahalo School of Business.

Posted in Book Review | 4 Comments »

Bootstrapping: Weapons of Mass Reconstruction

I’m a Hacker News-style entrepreneur with a family situation that precludes seeking investment or working full time.  This has caused me to seek out a wide variety of resources as I learn about entrepreneurship.  One of the writers I regularly read Sramana Mitra.  The writing in her regular column is usually not that applicable to me; it’s more aimed at macroeconomic-scale Big Entrepreneurship.  I read it anyway because it’s inspiring, hopeful writing and although it’s not applicable to my situation now, who knows where I’ll be in 5 or 10 or 20 years.

Having said that, I was very excited to hear about her new book “Bootstrapping: Weapons of Mass Reconstruction”.  It’s a book full of interviews with entrepreneurs who have successfully bootstrapped their companies from a kitchen table to millions of dollars of revenue or an acquisition.  I like this kind of book because it goes into more detail than a typical blog post or article, and the interview style is more human than the usual business book third-person style.  So I went into the book with high hopes, and those high hopes were met (with a caveat).

My favorite interview of the whole book was the first one, was with Greg Gianforte.  I’d read Greg’s bootstrapping book Bootstrapping Your Business: Start And Grow a Successful Company With Almost No Money before and heard him talk – he’s an engaging, funny speaker and writer and I’d recommend him to anyone.  I also felt a stronger connection to his story because he was more of a software entrepreneur like me (well, like I’d like to be).

The interviews in the rest of the book were every bit as lively and entertaining, but most of the founders were in media, advertising, or content, not specifically software.  For someone who was interested in one of these areas, this book is a gold mine of experience and insight.  I ended up reading them because the writing and the characters were interesting, but the stories didn’t seem as personally relevant to me.

One more thing, despite the word “Bootstrapping” in the title, most of the companies either self funded or bootstrapped a prototype together enough to get angel or VC investment.  So it’s bootstrapping in the sense of product before investment, not strict bootstrapping in the sense of avoiding all investment.  Not a problem, just a clarification.

All in all, this book is every bit as good as Founders at Work, albeit with less well known companies and a media/content/advertising focus.  It’s a good read for anyone interested in entrepreneurship and would be a priceless reference to anyone in those fields.

Posted in Book Review | 1 Comment »

Internet Business Mastery QuickTip Index

I just finished listening to all the back episodes of the podcast Internet Business Mastery. Since it’s an old show (started in October 2005) it has been fun to watch the hosts Sterling and Jay evolve in fast-forward. They started out with a lot of enthusiasm but didn’t seem quite sure what they wanted the podcast to be. Over time, they gained more polish, experience, and confidence and narrowed their focus. The production value of their show improved and they really started to implement their ideas in their own businesses and lives.

It actually a great sales pitch to compare the early episodes where they say “This is what we want to do” to the most recent episodes where they say “This is what we did and how it worked.” Anyone can say “Start and Internet business and you can travel the world,” but it’s a lot more credible to hear “We’re moving to Buenos Aires for 6 months just because we can.”

The podcast is pretty inspiring and somewhat informational. The free stuff is mainly good for little tips and inspiration. I haven’t bought their seminar, coaching course, or membership site access but I’m sure it’s much more helpful and thorough inside the pay-wall. For someone interested in meatier content about information marketing, I’d definitely recommend them.

One word of warning. If you’re reading my blog, you’re probably from the build-a-startup-and-make-it-so-good-that-it-becomes-popular-by-word-of-mouth school. If that’s the case, the focus mostly on marketing can sound a little slimy, a litte pushy, a little marketerese. While I certainly don’t advocate marketing at the expense of product quality, most developers are so terrible at and distrustful of it that any little bits they pick up will help. Things like using an email list, developing a sale over multiple contacts, etc. It’s okay to add value to your offering by marketing it. Wiser people than me have made this point. Sterling and Jay are a pleasant, non-threatening introduction to a lot of marketing concepts and I recommend them.

Two (very small) beefs. First, because they do a lot of affiliate marketing, they want you to click through their site and so they don’t tell you the name of the company or product they’re pluggig. You HAVE to go to their website to click. Second, their website isn’t very organized (it’s just a big pile of WordPress entries), so it’s not easy to find the link you’re looking for. Plus some of their links are wrong and most of the older ones are broken. So rather than complain, I compiled this list of all the shows, recommendations, and links for every episode. I did prune out broken links and time-sensitive things as well. You’re welcome!

[NOTE: Episodes 1-31 are no longer available for download.  They will be sold later on CD with transcripts.]

Read the rest of this entry »

Posted in Startups | 8 Comments »

Announcing My Startup: GeekStack

Are you in the mood for vaporware?  An exciting idea?  More of me talking?  Then head over to my new startup GeekStack!

There’s a lot more info there (really, the home page is a wall of words) but the pitch is: “Collectible trading cards with the people, events, and achievements that our world is built on.”  I have a first blog post up, called “Why Would A Software Geek Make A Physical Product?” which gives some more background and a sample of the writing style I’ll use (although if you’re reading this, you probably know how I write).

I have a lot of the ideas about how it will work but there are questions that still need to be answered.  Check it out and take the chance to give me some feedback and help shape the development of the GeekStack.

Posted in Startups | 1 Comment »

Freemium Isn’t A Business Model, It’s A Marketing And Trust Strategy

I’ve chimed in once or twice on the free vs. paid debate, and I’m firmly in the camp that you should charge customers money.  You get money, they show some commitment, the expectation that comes with their money means you have an incentive to produce higher quality, and it gives you the funds and resources to sustain your business.  Better yet, if they pay you repeatedly, you have predictable revenue and a baseline to measure the effectiveness of business-growing activities like marketing and advertising.  So there’s the full disclosure of my preferences.

Now you should definitely take my opinion with a grain of salt.  I’ve neither succeeded at a paid business nor failed with a freemium business.  I have never actually started or run a business.  But I am good at listening to lots of people and figuring out who’s telling the truth, who has an agenda, and what assumptions lie behind what people are saying.  And now I’ll apply that skill to Mark Evans’ latest post Freemium is Not a Business Model.

[For those who don't know, "freemium" is where you have a trial or limited version of your product that still does enough to provide some value, and a premium version with more features or capacity or X that some fraction of people will pay for.  The hope is that you make enough money off the premium customers to support the many free ones.]

Mark’s point is that many Web2.0 companies are using freemium as an excuse not to make something valuable.  It’s not a long article, and this quote sums it up pretty well:

For consumer-focused companies, however, freemium is fool’s gold…and, most important, it’s not a business model to create a viable and vibrant company.

Your business model might be to make something good enough that people will use it for free, get a big audience, then sell your company.  But then you’re not really creating a product customers, you’re creating a product on spec to sell to another business.  If you know beforehand that that’s what you’re doing (Paul Graham recommends this approach), it’s fine; just don’t fool yourself into thinking that your users are actually your customers.

I don’t think that giving things away is inherently bad, but it has to be put in context.  The point of giving your product away is to make impressions on potential customers.  There’s another name for this: marketing.  If someone is ever going to buy your product, they have to a) know about it, and b) trust it.

People who don’t know something exists will never buy or use it.  Period.  It’s exactly the same as how people never buy things that don’t exist.  If a potential customer doesn’t know about your product, then to them it doesn’t exist.  Giving the product away lets people use it, and others can see people using it, users tell other people about it, etc.  Those impressions are the same or better than the ones you have to pay for in advertising, hence the appeal of the free sample.

When people use your product, they can tell if they like it and want more.  For instance, there are a million different calorie tracker websites and programs out there.  It’s not a hard programming problem, it’s a data (why isn’t the food I just ate in here?) and interface (this takes too long, forget about it) problem.  Those are things you can’t determine from a sales website, and definitely not from the claims the seller makes.  So I went for a couple years before I found a situation where I trusted one enough to try it.  I got a recommendation for Gyminee from someone I respected, and since it was free, I gave it a try.  I found it easy enough to use, with a combination of fairly good food database and extremely easy to use interface, so I’ve stuck with it and recommended it to a few people.  There is a Pro version that offers things like meal and workout planning that I’m not currently interested in.  But if I do get more serious about my fitness and nutrition, there’s about a 99% chance that I’ll keep using Gyminee and about a 1% chance I’ll switch.  Letting me use the free features turned a single impression into a potential customer.  (plus it made me happy enough to plug it to everyone here)

Is it worth it to Gyminee to have me?  Is this a success (because I use and recommend it) or a failure (because I haven’t paid them anything) of freemium?  We can’t tell! Without knowing their expenses and conversion rates, we can’t say whether this is good or not.  Let’s play with some numbers and see.

Here are some wild guesses about their business:

• Monthly hosting: $70 for a month for a 1GB slice from Slicehost
• Startup living for 3 people in Hunstville, AL: $3,600/mo
• Office, internet, etc: $1,300

This would give them roughly $5,000/month expenses.  Gyminee Pro costs $5/mo, payable in 3 month chunks.  So they would need 1,000 Pro customers to break even.  If they convert 2% of signups into Pro accounts, they would need 50,000 registered users.  If they have $50,000 in funding/savings/etc, then they have 10 months to get to that point.

What does this mean?  Nothing!  Even in this simplified model of their business, it’s a complex multivariate relationship.  If they’re not where they want to be, they can do lots of things to improve it:

• raise more money
• reduce their expenses
• raise prices for Pro accounts
• create another set of features for a more expensive “Arnold”-level account
• sell either the meal OR workout planning as a sub-Pro account
• create more leads and registered users
• improve their sales process so they improve the percentages in their customer pipeline

You know what’s even better?  They can do ALL of these things, within the limits of their time and resource constraints.  For instance, since it seems like a young product, most of their costs have been related to designing and building the site.  That is a fairly fixed cost that is already spent, so their best bet now is probably to get more and more customers to reduce the per-user cost of that upfront design work.  Once your product is mature enough to be competitive, sales becomes more important.  This is not some inherent quality of sales – when engineering makes the product better, sales becomes a relative weakness.  When your sales grow fast and you enter new markets and people become used to your product, engineering becomes a relative weakness and that’s a good time to improve your product.  You can improve your overall position by improving whatever is weakest in your business.

So if freemium isn’t when you should use freemium or not.  These are the questions to ask:

1. Are there enough people willing to pay for my product to support my business goals?
2. Is there a subset of features of this product that’s enticing enough to stand on its own?
3. What percentage of my paying market will be satisfied with that subset and decide not to pay?
4. Based on my customer pipeline, what is my customer acquisition cost?
5. What is my cost to support each free user?

So if (revenue lost in #3 + (#5 * # of users)) < (#4 * # of paying customers), then you should consider freemium.

Done? NO!  This is not a one time calculation!  You have to periodically reevaluate each of those to determine if that relationship still holds.  So any changes you make should be temporary, so you can test the effects and decide if it is worth it to continue that change.  It’s up to you to decide whether it’s fool’s gold or real gold.

Fortunately, there is a good place where we can see this in action – the iPhone App Store.  It’s the one redeeming quality of all the mercilessly annoying whining about price changes in the comments: you get a record of different prices at different times.  I’ve seen lots of examples where a company has lowered the price, made a lot of sales, shown up on the “What’s Hot” list, become popular, and then raised the price again.  Sometimes, like for AirSharing and MotoChaser, where they have a free or low introductory price, then raise it.  This serves two purposes: getting a feel for demand at different prices, and getting some free publicity.

Follow any discussion board for entrepreneurs, and there will be articles and conversations about pricing strategy every week.  The reason people say it’s an art, not a science, is because the optimal pricing strategy is different for every business, and it changes as the business changes as well.  Consider options, make informed guesses, and experiment until you find what works for you.

Or you could do like me, and work on creating free content that you have to pay to use.  It’ll make sense soon – subscribe to stay tuned!

UPDATE:  Dries Buytaert at Acquia and Mollom wrote a similar article about he uses a combination of freemium and open source to not only drive business but get valuable development contributions.  Thanks Dries!

Posted in Business | 5 Comments »

Chrome, the Google Docs-mobile

A few weeks ago, Google Chrome was released with much fanfare, press, celebration, comic books, and praise (with the usual skepticism and contrarian views thrown in for good measure).  People wondered if Google was getting into a browser war, an OS war, a land war in Asia, whatever.  I kept waiting, kept waiting, kept waiting until finally … oops, no finally, just more waiting.  No one pointed out the biggest strategic benefit of Google Chrome.

First, some background.  Google makes a lot of money.  Like, they didn’t have enough bathtubs in the Googleplex to put all the money in.  They were going to build swimming pools to put their cash in but all of the pool contractors in the Bay Area were already committed, so they’re working on damming and draining part of the San Francisco Bay to make a pit big enough to put all of the coins, bills, doubloons, and gems that those little blue text ads deliver to Mountain View.  Meanwhile, Larry and Sergey are impatiently waiting to fulfill their dream of swimming through it like Scrooge McDuck.

So Google = Money = Good.  But they make ALL (like 99+%) of it from advertising, about 2/3 from search ads and 1/3 from contextual ads on other websites.  So although they completely own this market, making more money than all of their competitors combined and more than anyone imagined was possible, this single-source-of-revenue thing scares the crap out of a lot of people (just ask anyone who has lost a job).  That’s the only criticism of Google as a business that has any real substance.

What are the biggest, juiciest targets for a behemoth that needs another revenue source?  Let’s look at the cash cows in the computer industry and how attractive they would be to Google:

• Hardware: a total non-starter.  While Google might run the best data centers in the world, it is also one of their major competitive advantages, both in cost and performance.  Selling or sharing it is out of the question.  Other fields like PCs or servers are too low margin compared to their current business.  Besides, hardware involves atoms, and Google has no experience with atoms.
• Operating Systems:  Sure, Apple and Microsoft make a ton of money and high margins off of their OS products, but they also have decades of accumulated advantage, installed base, and brand equity.  And they got to build those things back when people PAID for new operating systems.
• Office Software:  Someone at Google is at least as smart as me because they went through the same process of elimination and ended up here.  So they’ve built and bought their way into Google Docs, which does enough of what people expect in an office suite that it is considered a plausible alternative to MS Office.

They built it, some businesses have adopted it, but they’re not making billions of dollars off of it.  Why not?  Let’s ask Joel.  His Strategy Letter III is probably the most important business lesson that people don’t get.

The only strategy in getting people to switch to your product is to eliminate barriers…Think of these barriers as an obstacle course that people have to run before you can count them as your customers. If you start out with a field of 1000 runners, about half of them will trip on the tires; half of the survivors won’t be strong enough to jump the wall; half of those survivors will fall off the rope ladder into the mud, and so on, until only 1 or 2 people actually overcome all the hurdles. With 8 or 9 barriers, everybody will have one non-negotiable deal killer. This calculus means that eliminating barriers to switching is the most important thing you have to do if you want to take over an existing market, because eliminating just one barrier will likely double your sales. Eliminate two barriers, and you’ll double your sales again.

(Incidentally, he used Excel as his example, pointing to the last time a smart aggressive software company with one revenue stream was looking to diversify.  Maybe office software is just more usurpable than operating systems.)

Google is facing a whole different set of barriers to adoption than Microsoft faced when attacking Lotus 123.  What are some of the barriers to adoption facing Google Docs?

1. Storage space is limited.
2. MS Office has office has more features.
3. It’s slower than installed apps.
4. It can only be used when online.
5. People are used to opening programs, not websites to work on documents.
6. IT Departments won’t upgrade their browsers beyond IE negative three.
7. [UPDATED] Some companies will NOT store their docs online – they only want them on their own machines/network (government, confidential, corporate secrets, etc)

Pre-Chrome, it looked like only #1 and sort-of #2 could be solved.  Google, home of the original 1GB email account, isn’t afraid to offer more space when their products are mature.  They have great developer resources to add whatever features are necessary, but the JavaScript foundation put a cap on the kinds of features that could be delivered with acceptable performance.  The rest just seemed out of reach.

How does Chrome change this?

• The V8 JavaScript engine greatly improves the performance, basically solving #2 and #3.  Coupled with the size and bloat of MS Office, Google Docs on Chrome is pretty comparable for speed.  Also, now Google can control the entire stack between the OS and the office apps (browser, renderer, JS engine, software, etc) so they can optimize in ways that they couldn’t do on other browsers.  Both Google Docs in Chrome and MS Excel take 1-2 seconds to open on my computer, while Firefox 3 took about 4 seconds and went through several ugly partial rendering states.
• Google Gears is pre-installed, which should speed up adoption of Gears and solve #4.
• The “Create Application Shortcuts” feature means that you get a nice desktop link that gives you an applicationesque window with either the list of all your docs or a specific doc, which can also be easily synced for offline access.  Take a look:
• Bye bye, #5.
• And last but not least, the $50 billion question, what about #6?  Imagine a version of Chrome with a different installer that a) included an IT controlled whitelist, b) automatically ran the offline setup after installing, and c) created appropriate shortcuts.  This means it can be centrally installed, restricted from general browsing, and treated like an installed app.  IE6 or 7’s role isn’t changed.  That would get the seal of approval of many more IT departments because of the greater control they would have over it vs a standard browser app.
• [UPDATED] If there was an option to store documents offline only, that would solve #7.  This would negate one of Google Docs’ biggest strengths (collaboration) but giving companies that option just might be worth $50B.

So in one move, Google addressed all but one of the strongest obstacles to Google Docs, paving the way for a much bigger, more profitable expansion and the coveted second revenue source.  Can you think of any other obstacles to the wider adoption of Google Docs that Google needs to address?

[UPDATES: Thanks for the suggestion Evan!]

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Programming Celebrities

A few months ago, my wife went on a kick where we watched the first few seasons of the TV show Dallas, rented on DVD from Blockbuster Online. If you watch 2-3 episodes a day of anything, you can’t but help become a little obsessed. So when we heard there was going to be a movie remake of Dallas, we immediately critiqued all of their casting decisions and came up with out own more accurate cast for the movie.  We spent weeks debating the pros and cons of each potential casting choice, scoured IMDB like Nike at a Brooklyn playground, and came up with the perfect cast.  (note to self:  If you ever spend that much time on anything, WRITE IT DOWN!).

Now I don’t actually care about a single mainstream celebrity, not one bit.  I’m pretty up to speed on their lives due to the gossip magazines my wife leaves around the house (any reading material is acceptable in the restroom) but unless there was a complete debacle like at the end of Miss Congeniality, I would never actually seek out celebrity news.

I don’t care about celebrities, but I had a roaring good time casting Dallas, so I decided to try the same exercise with media I do care about: nerdy programming blogs!  I have my own set of celebrities that are huge in their own sphere but who are COMPLETELY INVISIBLE to normal people.  A normal person, like my wife, would have no idea who any of these people are. So as my gift to everyone who needs any easy way to explain the personality and influence of a programming blogger, I present this mapping of real world celebrities to programming blogosphere celebrities:

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The GoogleCam Has Covered A Lot of Miles

I’m a fan of the Fail Blog, and the recent Sign Design Fail included a Google Maps StreetView link to Concord, NC, a suburb of Charlotte. They have streetview there? Apparently. I zoomed out to the entire USA and they have covered a TON of cities, many more than I would have suspected in the limited time it has been out. Apparently their data integration process is pretty streamlined to handle all that.

(click for bigness)

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Hey Language Snobs: Don’t Pinch Pennies

Programming language snobs are penny pinchers. That’s a tough sentence to write for some that just finished holding a workshop to help people learn Lisp of all languages. Why would I make such a bold, inflammatory statement? (No, not to troll. Most of the criticisms in this article are aimed at myself, based on my own actions over the last few years.) I had an unpleasant realization after listening to two excellent talks that developed this idea planted in my head by Raganwald with this post he quoted a few months ago:

“…you can count the number of games written in a purely functional style on one hand. Is it that language tinkerers are less concerned about writing real applications? That they know you can solve any problem with focused grunt work, but it’s not interesting to them? That the spark and newness of a different language is its own reward? Either way, the BASIC programmers win when it comes down to getting projects finished.”

—James Hague, Slumming with BASIC Programmers

The gist of the post is that uber-languages like Lisp, Erlang, Ruby, and even C are worlds ahead of BASIC, but somehow a group of Neanderthals put down their clubs and wiped away their drool long enough to write a slew of various and impressive computer games using BASIC. OK, he didn’t say that, his exact words were “…largely written by people with minimal programming background.” I was just translating for the language snobs out there. But then, mid-gloat, he hits them, you (even me) with that damning quote above about getting projects finished.

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Posted in Programming, Startups | 27 Comments »