Credit for the Freemium business model comes from “A VC” blog (link) I’m going to paraphrase here – build a service that someone wants, give it away and then when you have lots of users switch them to a “fare paying model”.I’ve argued that this is NOT the correct way to build a business. People will do anything for free… getting them to pay money is much harder. Typically about 1% or less of your user base will convert. So for Skype that would be about 60,000 of their 6 million users.Flickr now has 10 million members… so using this number we can expect about 100,000 to convert.Well Russell Buckley over at MobHappy blog has the scoop. So far, of the 10 million users they have 80 who order prints. What they don’t disclose is the number of pro accounts which run $24.95 (a pittance). Lets say it’s a 100K that would be about $2.5 million in revenue.Oops – not quite what the VC’s had in mind.Remember the Prime Directives…
1) A known customer with an identifiable problem&
2)
Measurable, sustainable, profitable, revenue from volume
1 is easy, everyone has a problem – 2 is much harder. It’s not about the number of users you have, it’s about the number that pays you something. I predict that Freemium model will come under closer scrutiny from now on.
“Starting something” (link)A must read book for any entrepreneur. Wayne McVicker writes a compelling “must” read about control, confrontation and corporate culture. I found myself agreeing with him on everything. In 16 years of entrepreneurial activity I’ve seen almost everything he talks about. At their core the two founders set out to help improve the way things are done in the health care industry and against all odds they succeed. What made me smile the most – their financials – after four years they had just over $2.4 million in revenue almost the same as Microsoft at the same time in their existence and yet when they went public they had a market cap which exceeded $3 billion dollars.Imagine showing up to your friendly VC today – you have this newly minted business plan, you have your five year financial pro-forma which shows impressive growth etc. And yet you get shown the door. The old rule of thumb was $50 million in five years. Yeah right. This company managed $2.4 million in 4 years and yet the VC’s etc were all over it. As I’ve learned the hard way over the last 16 years when the “GOLD” shows up the rules change and you’d better be willing to learn and adapt.The entrepreneur may have a vision to help someone out, improve the way things are done, but the guys with the GOLD have a completely different perspective on life. That’s OK… it takes all sorts and this time around I’m ready to adapt.
Hard to believe that Mozilla can release a piece of software like this… the first thing I look for is compatibility i.e. what does it break. Well it breaks ALL of my extensions. That’s just plain nuts. It means that you are fundamentally changing something under the covers. Not a good way to influence and maintain a friendly relationship with all the extension developers out there.The second thing I check for is the uninstall. Install and uninstall should be seamless. Nope… try Add/Remove in windows and you’re in for a surprise. In this day and age it’s vital that software developers respect the customer i.e. the end user and make it easy for them or the help desk to Add/Remove components.Here was the final straw – I fired up FireFox 2.0 (called Bon Echo for some reason) and went to customize the toolbar to add an icon for my favorites. It’s not there. How can it be there in 1.5 but not in 2.0?Well the race is on – I.E. 7 is on the way so expect a flurry of activity around FireFox, but they’d better get serious otherwise I.E. is going to eat their lunch (again)
Today I got hit by a PayPal Phishing email scam … I clicked on the link to see what would happen. Sure enough it loads up a “PayPal” looking page… however you get to see the first indication of trouble… the URL started with //p7.hostingprod etc Not an official PayPal hosting site!What’s interesting is that if you try and log in with your correct username but a fake password it will reject you. If you log in with your correct username and password it will present another page with all kinds of interesting requests. The RED ALERT – SHIELDS UP Mr. SCOTTY is when it asks you for your bank pin number and social security number! It’s way too easy to click on these emails and start entering data without thinking. So here are a couple of tips beyond the obvious. I’ve set my default browser to FireFox and I’ve installed a couple of nifty extensions…(1) Server Spy (Home page)(2) Show IP (Home Page)Server spy tells me what servers running and Show IP allows me to do a look up against the IP address of the server. Obviously PayPal has completely different information vs. the phisher. Now if I get a suspicious email and I click on it I can easily see what’s going on in the browser.And yes – I have alerted PayPal, I suspended my account and changed all login passwords etc. Kudos to PayPal for having an efficient mechanism to lock down your vital information. Be careful out there.
http://pxn8.comWhat a great name (had to come from a software company in Ireland) for an awesome piece of software…. Why? In a nutshell it does just what the author claims it will do. Online image editing software that any picture taker can understand AND online imaging software an ISP can understand, deploy and offer as a $$/€£ service. In a day an age when it takes a PhD to understand PhotoShop, Pix-En-Ate brings a refreshing dose of simplicity (not to be confused with the power of the program). Corporate info: http://sxoop.com/ Product info @ http://sxoop.com/pxn8.html
For an entrepreneur trying to predict the future is really, really hard work. Typically as technologists we like to think we are three steps ahead of the rest of the world and that by figuring out the Next Big Thing (NBT) are fortunes are assured. As I surf the web, read the latest blogs I’m constantly reminded that really smart people get up everyday and are trying to figure out what’s next. The techies get really excited and proudly display their latest gee whiz cool features. AJAX, Ruby on Rails and blogs are all the rage. Even Mobile is getting some well deserved attention. There’s lots of action and once again people are talking and the buzz is back. But now comes the hard part – monetization of the NBT.At some point you have to sit down and write a plan for what you are going to do. What happens the second you put something down on paper – it’s WRONG! I’ve been in front of enough VC’s to know that every forecast I’ve created is wrong, my projections about customer adoption rates are wrong, and the amount of money I’m going to need is wrong. But I’ve done everything they’ve asked me to do, the business plan is short and to the point, my technology solution is clearly explained, I have a team, and my projections are in line with everybody else’s… so what’s wrong with this picture. CUSTOMERS… and not just any customers… customers who have used your product and have paid money for it. Everybody tries to predict the future… the key is making the assumption and then checking those assumptions with customers. And this is where a willingness to learn and adapt comes into play. Your initial projections will be wrong, and your ability to forecast is dependant on “predictable revenue,” something which no startup has. The VC’s know this… so why not do something a little different… iterate and be willing to learn and adapt (of course this means your ego is going to get flattened as you find our you’re wrong 99% of the time)Come up with the NBT, but put yourself on a 90 day deliverable timeline, i.e. you have exactly 30 days to execute on building the code. You then have another 30 days to execute on finding a customer for your new product, and you then have another 30 days to close a deal. Zero to paying customer in 90 days. Now that’s hard work – but you will have demonstrated two critical elements not only to yourself but also to your customers and to your potential funders… a willingness to learn and adapt (requires objectivity), and focus and execution on a common plan.The 90 day model is something we're instigating at 5o9 Inc. We have until April 3rd to close our first customer. We started on January 3rd with NO code/NO product/No ideas – but we all have a desire to succeed and solve customer problems. The first thing we had to do was assemble the team… Done. We then had to come up to speed on the current state of the art… Done. Next we had to test our skills against state of the art… Done. Next we had to actually build something that worked and improved over something currently in the marketplace… Done. Next we had to find a potential customer… Done. Next we have to close that customer… in process.90 days is incredibly short. In fact it’s painfully short. Most people might be able to come up with an idea in 90 days, take another 90 days to build it and then another 90 days to test drive it. Depending on the number of people in your company that’s ¾’s of a year and anywhere from 100K to 250K in funding. By keeping the timeline short, the scope of the product will be kept under control. By requiring customers to validate, objectivity rules vs. I’m in love with the technology, AND by requiring revenue, a willingness to learn and adapt is required. I’m taking 16 years of experiencing and compressing it into 90 days. We’ve taken a stab at predicting the future… we’ve then worked backwards to test our assumptions. We have our strategy in place, we’re now executing on the tactics. So far so good. In a few short days our team gets to discover if we’re on track. I think we are – but that would be predicting the future – customers and revenue will be a stronger indicator for an objective observer.
As I said in my last post I’ve been playing around with one of the new smartphones. It’s amazing what it can do, and it’s also amazing what it can’t do.I’ve spent some time simply “trying” to surf the web. The experience is one of frustration. Let me give you a simple example… I went to www.yahoo.com – you would think that like Google it would automatically recognize that I was using a mobile device. Nope… it downloads everything. This is a HUGE pain. Next I went to the finance section and asked for a quote.Another HUGE pain – I sat there while it downloaded over 100,000 bytes of data (poorly formatted I might add). What I wanted could have been downloaded in 5,000 bytes i.e. JUST the actual quote… compressed that would have been less than 1500 bytes or in NEW MONEY – about 2 seconds vs. the 30 seconds or so I waited for the full page.Where is the button that says – “send me only the first page of data?” rather than trying to download everything. Where is the ability to simply send exactly what I need i.e. web clipping of an exact sentence or stock quote or whatever?It’s simply not there – yet.I’ll make a prediction – web pages are going to get VERY simple. No more crazy graphics – advertising will be just like email – text based with a hyperlink, and the pages will be formatted for pretty much TEXT only, why? Pretty simple really. What’s worked really well on the Blackberry? Email – why? Because it’s easy to read. This device is pretty darn good for reading things that are correctly formatted for the page.So what is universal and works on EVERY device on the planet (pretty much) good old fashioned text. Forget about all this JavaScript etc, it already has huge problems on this device (try logging into an AJAX site).It’s all going to get very simple – text, highly compressed and delivered a page or two at a time (i.e. store the second page in memory and then go get the third if necessary).In other words it’s 1996 all over again for mobile devices and web pages.(The next mobile issue waiting to be solved is SSL – I’ll save some ideas about that for another post)
And it’s all about “ME” (that’s you, and me, and billions of other ME’s). As I mentioned a while back the World Wide Wait just got a little shorter with something we call mod_gzip+ which includes support for the BZ2 compression algorithm running on Apache web server.A number of people (including myself) questioned the need for this. The argument is simple to make – mod_gzip rocks, a lot of people use it and according to SourceForge a lot of people visit every month to pick up the source code for this kick ass Apache module. Mod_gzip is “good enough” for most.So why bother with all of the complexity to add another codec to something that is already good enough? Well at first blush the answer is non obvious. Technically it was a challenge because you have to architect two components a server side module and a client side module. Try building a ultra thin MIME filter for MSIE and you’ll know what I mean.However it has now become much more obvious why mod_gzip needs to be upgraded. This week my partner and I purchased a new smartphone each. He picked up a Treo and I got a AudioVox, both run Windows Mobile 5.0, Pocket Explorer and Opera’s new browser (beta until June). We both purchased them on the same day and walked out of the store with our shinny new toy. Jumped in the car, fired up the phone, launched the browser and attempted to contact www.CNN.com What were we thinking – obviously not much. Even with the “all you can eat broadband rate” from Verizon we had to suffer through over a ¼ MB download. The page is completely out of format in the browser so you are scrolling up and down and left and right. Folks, that’s NOT going to work. I’ll scroll up and down but forget left to right.Now for the real headache – well there’s two actually… try this on a smartphone. Go to Amazon and log in to your account via their secure server. Good luck… Next go to a web site and sign up for a subscription… I’ll bet you abandon your attempt after the first line of the form.And for the piece de resistance – go to Google. Google is smart enough to recognize that you are logging on with a PDA – BRILLIANT the page formats correctly… I do a quick search for mod_gzip – 465,000 hits… cool, I click on the first link – boom – I leave Google’s web site and head over to the new web site. It doesn’t recognize me, the device, my browser – NOTHING! Why doesn’t Google cache a MOBILE version of my search results?Folks the current mobile experience sucks. It’s MAJOR slow – wireless networks are VERY different from DSL Modem networks etc. “Can You Hear Me Now” is going to mean something very different on a smartphone. And two other things – the web sites how no idea who is asking for a web page i.e. a mobile device vs. a desktop and finally it (the web server) has NO idea who I am – if you think I’m going to enter my information 10 times a day on this thing you’re wrong. First thing it’s going to need is the very best data compression algorithms to speed up content delivery – good we have that one done.Second thing it’s going to need is a way to recognize who’s calling – we’ll have that one done shortly. (Hint you’re going to need a better client side app than the current browsers).
