Doing Words

Everybody can be working while nobody makes money

// November 30th, 2011 // 0 Comments // Other news

Meeting with someone this week who wants to leave their job and build a tech startup, he hit me with this argument: “There are already three other startups doing something similar in Australia, they’re all growing really fast, so there’s clearly money to be made”.

Sorry, but no.

I remember when I was co-founder of a particular startup that was in a very ‘hot’ space — we knew this because there were six other startups in Australia doing something similar, we all appeared to be growing fast, and similar businesses in the US were getting press coverage every week about how quickly they were growing.

Yet none of these startups was making money. In fact, we were all losing money — some more rapidly than others. We were all betting on the market growing, betting that our cost of customer acquisition would come down as we learned more about the best marketing channels and tested different forms of conversion.

Some of us were backed by large corporations, some of us by venture capitalists and some of us by angel investors. You’d see our brands everywhere, in banner ads, newspapers, on the backs of buses and even in television commercials. You read about us in the technology press at least monthly. To the outsider, we all looked like successful businesses.

But we all had one thing in common: we had a certain amount of money and time in which to create a profitable business.

We were test pilots, given a plane loaded with debt and a runway from which to make it fly. We could throw out things and people to make it lighter, we could add more marketing or tech engines to make it accelerate faster, but the weight, speed and runway length were all connected variables. We knew some of our planes wouldn’t get into the air, but it wasn’t going to be us, so we and our competitors kept heading down the runway.

Don’t make the mistake of thinking a hot startup you see mentioned everywhere is evidence of a successful business, or that a crowded space in the tech startup sector is evidence of a successful business model.

Where are they today? The majority of our competitor’s planes crashed or exploded while still on the runway. We sold our passengers and their luggage to a competitor — our ejector seats worked, and we got to keep all our arms and legs and most of the airframe. In the US (which despite all the similarities, is a very different business environment) only one plane really got off the ground. None of the Australian startups in that space survive in their original form. Personally, I don’t regret pressing the ejector button.

I see evidence of similar market conditions today in smartphone app frameworks, social analytics, CMS and especially in daily deals.

It’s very possible to be working and not making any money, so don’t be fooled by a popular startup or business model. It’s not possible to keep making a loss indefinitely, because every runway has an end.

Grüv me and the importance of a clear consumer benefit

// November 26th, 2008 // 0 Comments // Uncategorized

John Biggs over at CrunchGear today neatly skewers music startup Grüvme.com and in the process talks about exactly why early-stage tech startups need the help of people like me.

GruvMe must fail. In a world of good ideas, it is a me-too media service that can’t even get its core business model – selling the songs people want to listen to – right. These clowns can’t even explain themselves in their FAQ, let alone produce a service worth or time and/or effort.

John has a lot of other criticisms of the product itself, but he points out exactly why your core consumer benefit must be front-and-center in everything you do online and off. Here are the big errors Grüvme has made:

Don’t mistake the user interface of your site for your core consumer benefit. Most new visitors will not understand what your service is about simply by gazing at the interface. Most users will be confused/annoyed enough to click off and never come back.

Don’t mistake a shiny photo of a happy person for your core consumer benefit. You might be excited that you found the perfect photo on a free stock photo library and your cousin the graphic designer was able to work it into your homepage design, but it’s not telling the visitor anything about why they should stick around. Looking at happy customers does not convert visitors to happy customers.

Don’t bury your core consumer benefit in a FAQ or Learn More section. Most casual visitors will never get that far — or spend that much time — on your site.

How can you make sure I don’t make the same mistake as Grüvme?

1. Build your service so you have a separate version of the homepage for new visitors, another for returning visitors that arent logged in, and a third version for loggedin users. Each audience has its own needs and won’t play nicely with the others.
2. Make sure you have your consumer benefit explained in 50 words or less.
3. Explain it in words. They are universal. Even searchbots understand them.
4. Use simple images to enhance, not replace.
5. You may use demo videos, but in addition to words. Keep demo videos very short and get to the point in the very first second of the clip.
6. Don’t force users to sign up before using your service (as Grüvme does.) Let them use a limited feature set without registration.
7. Get an expert (like, say, me) to help you do this as best as possible.

Casual visitors need low, low barriers before they’ll stick

// November 12th, 2008 // 0 Comments // Communication

Rationally, this pricing makes sense. But consumers are anything but rational.

You have to go a long way and add a lot of value if you want to get consumers to change an established pattern of behaviour. Sometimes you may find you have to massively subsidise their use of your product for a long time before you’re able to directly charge them anything at all. But it’s worth doing, since you’re paying for your site visitors.
 

Assume every visitor costs you money

Many of the startup business plans I work with assume that every visitor to the website will be ‘organic’ (finding their own way there) and assume that they will be ‘purpose driven’ (they have come to the site because they’re serious about finding a product in this category.

If only that were the case. In reality, unless you spend no money on search engine advertising, nearly all of your traffic for the first 12 months will be from your paid ads. You’re spending money getting them there, so that puts a real imperative on making sure as many of those visitors as possible becomes a customer, even if they’re only on a free account.

Forget about paying customers, focus on getting a customer

You have 10-30 seconds to convert a casual visitor. Take a long, hard look at the pre-registration sections of your website and strip out anything that might be a reason for the user to leave and look elsewhere. Let’s look at an example.

Backboard is another service in a crowded market that provides solutions for getting feedback on your work. It works for individuals with clients, teams and corporates and lets them share docs online, annotate and comment on them.

You can see classic pricing theory in the way their pricing chart is structured: surround the product you want people to buy with similar products that are much more expensive and cut-down products that are not that much cheaper.

But in Backboard’s case, your competitor is not other startups offering sharing/annotation products. Your competition is established behaviour: emailing docs to people and getting replies via email; and even worse: meetings! Both are apparently ‘free’ to use, well understood, zero-risk, and not that badly broken.

To get people to choose browser-based email over client-based email, Hotmail and Yahoo! had to offer consumers a tremendous amount of value in features and free-ness in order to get signups to scale. Late-comer Google, looking to leapfrog Yahoo!, Hotmail and client software, had to give away gigabytes of storage and invented all-new features that were best-of-class and better than anyone could reasonably expect to see offered for free.

So Backboard’s pricing chart is wrong because the only free product in the table is, in my opinion, not compelling enough to compete with meetings and emails. It’s not only boring, it’s potentially risky to use. Am I going to get in trouble if my boss hears someone else say that the mockup I sent around ‘wasn’t secure’ or ‘available to the whole internet’? Because that’s the question that arises when I see those security features aren’t included in the free product.

The ‘individual’ product – with all the features but limited to one account – is the product that should be offered for free. Get enough individual users in an organisation using Backboard and you have a chance to make something viral happen – colleagues notice most of the office early-adopters using Backboard and they might try it themselves. But if there’s just one guy – the eccentric, linux-using, smartphone-brandishing one with the long hair and the black tee shirt – it’s never going to take off.

Don’t bury your best feature

Finally, there’s a row missing from the pricing table: “storage.” It says elsewhere on the page that Backboard gives you unlimited storage, but says it in just about the most unappealing way possible:

“We do not restrict the total size of your account, but there is a file size limit for each upload (20 MB is sufficient for most files).”

What? Hello? You’re missing the biggest feature you have! Splash “UNLIMITED STORAGE!” in a new row across all your products in the table. Or better still, advertise 100GB for the free account, 1TB for team accounts and 10TB for office accounts. You want people to think, “100GB? For FREE? WOW!”

TechCrunch50 live on the web

// September 9th, 2008 // 0 Comments // Products, Startup

You could fly to San Francisco, be horrified at the cost of even a cheap hotel room, then spend USD500 just to be there, or you can watch the TechCrunch50 conference live on USTREAM and just pay the streaming bandwidth cost. This is the first time I’ve ever seen a USTREAM live video stream acceptably from Australia, so if that’s been the experience for you too, give this one a try – it seems to be working really well.

On the TechCrunch50 site you can skip directly to the video for each presenting startup immediately following their presentation.

iPhone App-onomics and prospecting for gold

// September 4th, 2008 // 0 Comments // software, Startup, strategy

Thirty minutes after installing 2.01 on my iPhone 2G I had purchased and downloaded 21 new iPhone apps. The whole experience – from finding to buying to downloading and installing – was so quick and easy that my credit card barely warmed up as the money drained away. I had to force myself to stop before I blew it. It was clear there was going to be quite a market for iPhone apps.

Later, I was talking to some friends who had a mind to start an iPhone App development business – would I like to be a part of it? Well, yes! Though the volatility of any new market can be a challenging place to start a business.

Weren’t they worried about planning for their business before the economics of iPhone apps was really clear? Beyond the obvious risk of not yet knowing how long it takes to build apps, how do you know what to charge and what your revenues are going to be? What the hot categories will be? How best to market your apps?

Their response was the right one: we don’t know, but the opportunities are as big as the risks – if we happen across a successful formula we could have a great business. I think that’s a great attitude and I hope to tell you more about this new Aussie iPhone App developer when the time is right.

Meantime, the volatility of a virgin App economy (“apponomy”?) trying to establish itself is becoming clear. Average prices for apps started way up, and now developers are concerned that prices for some apps have been cut in half, others have gone from paid to free. I think Marco Arment, the lead developer at Tumblr and developer of the iPhone App Instapaper, has it right when he predicts that app pricing should turn out to be fairly inelastic – that it shouldn’t matter whether you’re charging $2 or $10, the challenge is in getting someone to pay at all.

The problem with inelastic pricing is that it comes with significant momentum, both up and down. If consumers come to an Appstore and the average price for apps is $0.00, that makes it very difficult to charge even $2.00. If Apple had a problem with apponomics and decided to institute, say, a compulsory $2.00 charge for apps, that would set the expectation that apps are not free, and consumers would then be more likely to pay $5-$10 because of the perception that “apps are not free.”

The challenge for Marco and other developers trying to make a living doing this is: for most app developers, this is not a living, it is not even a main focus of work. Never mind the hobbyist developers doing it for fun, it’s the big businesses using Appstore as a marketing vehicle for their main desktop software that can really hurt your business. They don’t need iPhone customers, but they do need their desktop customers to have access to their software on their iPhone – those are two different things. A big software company that doesn’t really care about iPhone app revenues can really hurt your business if they’re in the same space.

Marco also talks about whether or not to make the iPhone version of Instapaper his main business and not developing any subsequent apps. His first app has been very successful: is he best to build on that success by developing more apps, or by improving the app he’s already built? Many would say to keep one foot in each camp, but Marco calls it right when he makes his decision: you double the complexity of your business and how it is affected by the volatility in the apponomy if you keep a foot in each camp.

The apponomy will settle down as it grows, though Apple may need to assist it in doing so – using the same email marketing it uses to promote music that will be popular on iTunes Store, featuring app developers on Apple.com and by supporting good developers with pricing breaks, free training and access to advice from the App platform development team. Whatever actions Apple takes, it needs to be fast, but subtle. Lots of small, incremental changes please – if they wear their hobnail boots as Apple sometimes does, it will only start the apponomy oscillating more wildly.

Meanwhile, this is a gold rush. Is there really gold in them thar hills, or is it just iron pyrite? There’s only so much you can learn from the greenhorns running out of the supply store with shovels and wheelbarrows. Sooner or later you have to buy your own shovel and go see for yourself… Marco, where’s the store?…

Will you help Trippything?

// May 2nd, 2008 // 0 Comments // platform, Products, Startup

As some of you may know, Elliot and I are toiling away building TrippyThing, a website that turns unfriendly, jargon-heavy confirmation emails from travel booking services into understandable, friendly, shareable trip itineraries.

We hope to tell you more about our launch timeframe for TrippyThing soon.

Right now, we need your help to add to our collection of travel booking confirmation emails.

These are the emails you receive when you book a flight, room, car, etc. The more confirmation emails we receive, the more services TrippyThing will work with when we launch.

We need your help. We need you to send us as many booking emails as possible, from as many companies as possible. In return for your help, we promise to build a cracking-good web service that will save you heaps of time when you next book a trip. (more…)

You don’t need SEO from the get-go

// April 8th, 2008 // 0 Comments // Startup

Brian Burns and I have recently discovered each other and are both excited to learn there’s someone out there doing the same kind of thing: helping startups build not just better products, but better stories about who they are and why their product matters. I may rave about his insights more than once in the next few weeks, and I apologise for that, but wherever possible I’ll try to extend on his work and maybe even argue a point or two to the contrary.

It’s not just me – you’ve got to love a guy who pins his heart right out there on his sleeve and declares something as bold as “startups don’t need SEO in a post like this one. He’s going to attract a lot of reactions.

I think Brian’s right about this, to a point: a new tech startup doesn’t need SEO for the first phase of growth.

For most startups, the first phase I call the “buzz phase” of growth, where you’re trying to find taste-makers, mavens, pundits, bloggers, journalists and geeks to try your product out and talk about it.

Loving the buzz phase right now? Feel like you can ride that Techcrunch love right on into Series B, trade sale or positive earnings growth? Sorry, but the buzz phase does end for most startups, usually when enough early adopters have judged it and found it cool or lacking something (or both). Sometimes it ends quite suddenly and irrevocably.

Be prepared for that to happen when you least expect it. And unless you’re building a product that’s only for the <10,000 people who make up the startup community, for success you need to have growth beyond the initial buzz.

Sure, a handful of startups go straight from buzz to broad consumer adoption or get acquired with no further investment in marketing. I’m certain if you were able to get the founders of those companies to talk honestly about it, they’d admit that it was none of their doing – it was a minor feature of their product that they never expected to be the killer app, they just happened to be in a space that one day Google, Yahoo! and Microsoft had to have a piece of, or suddenly it became cool for mainstream consumers to act a little geekier than normal in some respect, as in the current tulip mania for Twitter.

If it’s mainstream consumer adoption you’re looking for, after the buzz starts to fade, there are a few ways to pursue continued growth:

• If there’s even a hint of a zeitgeist about your product, use alt-PR and event marketing to try and convert your niche tech buzz into mainstream consumer buzz. Here I’m thinking of the way the founders of MySpace, YouTube and Digg ‘accidentally’ became rock stars overnight. Yeah, like that really happens.
• If you need to fundamentally change consumer behaviour (say, if you’re Netflix or Monster.com) guerilla advertising and smart TV ads may work best. Go talk to your backers about more cash.
• If you’re just trying to get consumers to switch from the product or service they use now to your product or service, keep consuming pageviews and growing time-per-month, sadly, you can’t beat ugly, dirty, sh*tty, boring, may-i-outsource-this-please SEO.

I hate SEO as much – or more than – the next guy, but it does work. They’ll show you the graphs (stretch) and detailed spreadsheets (yawn) to prove it, if you give them half a chance. Goodness me, is that really the time? [gets up and runs for the door...]