Continue Reading]]> In the early days of the App Store, search wasn’t really that important. With relatively few apps (and very few good apps), the directory/browse experience was ideal. For those of you who were around/pubescent during dotcom #1, that might remind you of a nimble upstart at the time– Yahoo. They proposed to categorize and organize all of the worthwhile content on the internet and did a truly outstanding job– for a while. Eventually, the web got too big and Yahoo Directory collapsed under it.

Enter: Apple. Proposing to categorize and organize all of the world’s apps. You can see the cracks forming. So what will Google do?

Mark my words, Google will onebox mobile app results. Hell, it might (should?) add an “Apps” vertical. If it did, it’d almost instant eclipse the App store in importance for most developers.

I know, I know.  It’s a bold prediction.  Hear me out.

Google has been working on search innovation for a decade and they’re getting damn good at ferreting out intent from your search queries.  In recent years, they’ve done what’s called oneboxing.  If they can confidently guess what information you want (or at least what search vertical you’re interested in), they tack it onto the top of the search results.  You’ve seen it thousands of time now.  Search for “weather seattle”, a stock ticker symbol like AAPL, or append the word “video” to any search.  Despite their brutal campaign against the folks in the world of SEO, Google is still better at search than anybody.

If you’re searching in a mobile browser for “Angry Birds”, there’s a pretty good chance that you’re looking to download it– and Google can trivially know what platform you’re searching on and which version might be best for you.  If you search for “currency converter” from your mobile phone are you well-served with a JavaScript-driven converter on an ad-infested web page (or worse yet, a non-functioning Flash/Java applet)?  Or would you be better served with a link to the best native app for the job?

You’re probably as disgusted with App Store search as I am– it’s fine for brand searches (like “Angry Birds”) but painfully bad for category searches.  The App Store is using ridiculous algorithms, forcing developers to stuff keywords into titles and giving us the equivalent of meta-keywords to help our cause.  Hell, the App Store even uses the developer’s company name as a meaningful factor (congratulations, Currency Converter, Inc., your shot at ranking for that search term just went up!).

What it should do (which would require a Google-sized index of the web) is the same thing that Google does– rank based on number of links (to the app store page), the quality of those links, and the anchor text used for those links.  It could also layer in social data, ratings, active usage data, and other things that only Apple has at their fingertips.  But they probably won’t– Apple is not a search company.

But Google is.  They could be a better way to find/buy apps almost overnight.  And it’d be a huge boon to app developers for all platforms.

The Rub

The big problem here, of course, is that Google will be helping Apple sell more apps (at least when people are viewing onebox results on an iPhone).  And Apple will still be hauling in their rapacious 30% (a fair fee if Apple is bringing the customer to the table– less so if all they are doing is handling the purchase/update process).  So even if Google includes a paid spot or two in their onebox, is there enough revenue room for Google make a buck?  With game developers paying $3-5 per install on the marketing front, I think so.  Outside of games, it’s a little less clear.

So what do you think.  Will Google do this?  If they do, would it be the right move? If Apple manages to do something productive with their Chomp acquisition, will it matter?

Continue Reading]]> As I mentioned in my first post in this series, we dove into the App Store with a ($2.99) Productivity App called TouchBase Calender.  It was a part-time effort as we were wrapping up other commitments, with the goal of learning about the App Store, getting up to speed on the iOS SDK and Objective-C, etc.  This post details what we learned about the paid apps market and it contains data that I don’t believe exists anywhere else.

First off– let me say that the paid side of the App Store is not where the real money is being made.  While you can churn out paid apps and make a handsome living, it’s not where you want to be if you want to impact the highest number of people and it’s (paradoxically) not where you want to be if you want to build a big business.  Let me explain with a handy screenshot of the top grossing apps in the App Store today (courtesy of App Annie).

Apps with a blue-ish background are free apps.  Apps with a green dollar sign have in-app purchases.  So there are *3* paid apps in the Top 20 Grossing List.  Things are only going to get worse for the world of paid apps.  Here’s a snip from a really awesome infographic from App Annie:

So why are free apps outperforming paid apps?  That deserves its own post.  In brief, it comes down to ARPU (average revenue per user).  Farmville-style games can pull in an ARPU $5 or more per month.  In fact, there are reports of $13 ARPUs.   Per month!  Per user!  Average!

How is this possible?  Virtual goods elegantly fill up the demand curve for an offering.  In other words, they accommodate customers who can happily spend hundreds or thousands of dollars (“Whales”, in Vegas parlance) without having to give up mainstream users (who can still be valuable as evangelists beyond the fact that they give the whales someone to play with).

With all of this revenue comes tremendous marketing power.  If you’re pulling in $5-10 per user, you can afford to “buy” a download via CPA or CPM marketing campaigns (which can cost $2-5 for a free user and a helluva lot more for a paid user).  With more users comes higher rankings in the app store, which brings more organic users.  All of the pros in this world buy their way up the Top 25 Lists until the next rank gets a bit too expensive and then float back down slowly, milking the free downloads while they are there.  Rinse, repeat.

It’s no wonder paid apps can’t compete.  How many users do you think you can buy at a $1.99 price point after Apple’s 30% cut? (hint: the answer is zero).

Okay, okay– back to paid apps, which is what this post is supposed to be about.

Sizing a Paid Market

Apple makes ranking numbers available, and a few great services (like App Annie) make it easy to look at historical performance of competitors on the app store…  But only in terms of rankings, not in terms of revenue.  Even though our first app was meant to be a part-time “fire and forget / learn the ropes” effort, we didn’t want to waste our time.   In short, we didn’t want to limit ourselves to pennies by picking a crappy market.  So we set out to understand the relationship between Top Grossing ranks and revenue.

First off, some category analysis.   Let’s take the #5 Top Grossing App in each category and see how they fare in the overall Top Grossing list (note: I’m grabbing the #5 somewhat arbitrarily because it’s a better reflection of the category– #1 might be a mega-outlier like Camera+).

So, yeah.  The App Store is really mostly a game store.  And a free game store at that.  But you still want to build paid apps?  So did we!  We had a nice tractable project we could build in our spare time, but we still wanted to be sure that it was worth our while.

Connecting the Dots – Ranks to Dollars

Our app was firmly in the Productivity category (good news– it sucks less than most of the other non-game categories).  But it probably makes sense to dig a bit deeper than just category (Apple is notoriously lax about policing categories, by the way– expect to compete with “OMG FREE MUSIC DOWNLOADS” apps, whatever category you end up competing in).  Our app was a calendar replacement app with a bit of a twist, so here was the big question.  If we had a hit and were the mack-daddy of calendar replacement apps, what’s in the pot of gold at the end of the rainbow?  We can see that Week Calendar is the top ranked calendar app in our category, with an overall grossing rank of #200 or so at the time (it’s more like 500 now).  We all know that hanging around the #1 spot on the Top Grossing list can get you about $7M in revenue in one Christmas month (ho ho ho!), but how could we get a sense of what a rank of #200 or so means in terms of dollars?  Google didn’t help much, so we started doing good old fashioned investigation.  We combed the web for blog posts where people where transparent about their numbers (like this one).  We asked friends and mailing lists for revenue/rank correlations for their apps.  We got about 15 good data points, which allowed us to create a rough power curve that looks a bit like this.

(Y Axis is gross revenue from App store only, X axis is rank on the Top Overall Grossing List)

Big fat disclaimers on this graph.  Many of these data points were received second-hand, were from old blog posts, etc.  Also, consider that some apps could have alternative sources of revenue (ads, notably).  And we’re correlating US App Store rankings with overall revenue– some of these folks might do well internationally and others might not translate so well.  But it got us in the ballpark of understanding just how steep the power curve was and how long the tail of app success really was.  Armed with our handy power curve, we drew a vertical line at Rank #200 and saw that we could, perhaps gross ~$70k/month in a best-case-scenario.  Not a big enough opportunity for a protracted/full-time effort, and certainly it was unlikely that we’d “win” the market, but fine for a part-time project to learn the iOS ropes.

So, should you launch a paid app?

Maybe.

Every entrepreneur is different.  If you want to build a big/impactful business, it’s not the right path (I explain why with a mess of data when I announced my newest venture to launch free travel apps for the iPhone).  If what you want is a bootstrapped freedom-from-employment effort or are passionate about an idea that’s a lousy fit for in-app purchases, paid apps are a great path.

Continue Reading]]> (We’re two web software geeks who decided to make a move to mobile. Our first app– built mostly on a part-time basis while we were wrapping up other commitments– is TouchBase Calendar, an iPhone Calendar app (iTunes link). It’s #5 or so in Paid Productivity as I write this. This series is about what we’ve learned so far.)

Post #1: Genesis & Backstory (note: a little light on data/techniques)
Post #2: Evaluating a (Paid) Mobile App Idea: How Much Could it Make? (coming soon)
Post #3: Launch Strategy & Sales #s (coming soon)
Post #4: Ongoing Marketing (coming soon, if we learn anything interesting)

Genesis and Backstory
(note: post 2-4 will be a little heavier on data/techniques, if you’d like to hear when those posts go up, follow me on Twitter Got questions you’d like addressed in upcoming posts? Please let me know in the comments.)

When I stepped down as CEO of RescueTime (now profitable, still growing like gangbusters, yay!) I entered a weird time in my life. I didn’t know what I wanted to do next or who I wanted to do it with (I obviously couldn’t recruit co-founders out of RescueTime), so I started having lots of “coffee dates”. It was exhausting stacking up half a dozen meetings a day with a broad assortment of folks.

It was a big transition from being a “maker” (on a maker schedule) to a guy who would meet with anybody. One thing that I came to realize (like a lot of people) that calendars suck– mobile calendars especially.

Mobile calendars fail to take advantage of the fact that they are on an amazing communication and mapping device.

Say I’m in the car driving to a meeting and realize that I don’t recall the exact address of the place I’m going. No problem! I’ll just pull up the event. It turns out that even if you’ve taken the trouble to add location to the event, your calendar doesn’t give you any way to get a map for that. Here’s what you see:

Even if I did go to the trouble of inviting Paul to the event when I created it (which I rarely do), I’m still 4 taps away from being able to compose an SMS.

And typing a coherent message on a touchscreen (often in a hurry or at a red light) ranges from painful to downright dangerous (texting and driving is a killer). Which is silly, when you think about it– communication around your calendar is generally limited to some very common messages, like:

• I’m here, where are you?
• I’m running X minutes late.
• Hey, I just wanted to confirm our X o’clock meeting at Y
• I need to postpone our meeting a little bit because I’m behind schedule.

When I looked at my SMS logs, I realize just how many of my messages were (usually typo-ridden) variations on those messages.

After almost a year of coffee meetings (and a few fun projects like CubeDuel), I found a co-founder close to home. Montana Low (who I’d worked with a bit at Jobster and RescueTime) had been freelancing for a few months and was looking to jump in as a founder. We both had some commitments to wrap up but wanted to get our feet wet with a tractable mobile idea.

We wanted to build it, but the big question lingering in our mind was “would it be worth it?”. If we did build it and “won” the category we were shooting for, would it be worth spending a few months of our free time? We’ll explain how we answered that question in post #2 of this series!

Continue Reading]]> “We are not UI experts but do know when we see a good design.”

I saw this on a mailing list I occasionally read, in a post where a company was looking to hire their first design employee/contractor. I think it’s a big part of why hiring designers is a process that often ends in failure: because most people who aren’t UI experts (heck, most UI experts fall into this camp as well), don’t know when they see a good design.

The challenge, of course, partially lies in the definition of “good design”. Let’s run through a few, in increasing order of importance.

Good Design = Beautiful/Cool Design

In this arena, we might actually know when we see a good design. We often have pretty good instincts on beauty and have a lifetime of training in understanding what other people find beautiful. Beautiful design can be important– but on the web it doesn’t seem to be a necessary element to success. Take the top 50 sites on the web. For a designer who primary considered themselves an artist, how many of those sites would be a source of pride if they were in their portfolio? Designers who primarily seek beauty/coolness often get lost in their own sense of beauty and engage in what I like to call “design guitar solos“– the visual equivalent of the talent-intensive squeeling that guitar pros engage in which only another guitar pro appreciates (or even understands). In the web design world this can range from a nuanced photoshop manifesto with dozens of layers to an incomprehensible JavaScript-powered UI. With great power comes great responsibility– and oftentimes a simple melody is the most effective song.

(note: grabbed from a 1994(!) article post by Peter Morville)

Good Design = Elicits the Desired “Feeling/Motivation”

This brings us closer to a good definition of effective visual design. While it’s not a web site, take a look at Apple’s FaceTime commercial. It’s simple. It doesn’t have the cyborg eyes and spinning globe of apps that Android’s recent commercials do. The design lead on that commercial didn’t get to do the metaphorical equivalent of playing a 12-minute solo behind his head in front of a sold out crowd. No epic visual effects. Just an emphasis on generating emotion– and pretty damn effective as Apple keeps trying to battle their way to the other side of the chasm. (Side note: I think Android’s robot craziness isn’t all that bad– they are currently aiming at early adopter geek-types. Remains to be seen if that’s brand they can pivot away from when the time comes to court “normals”. It wouldn’t be the path I’d choose, though!).

Good Design = Measurably Gets the Job Done

(note: Dave McClure is putting on the WarmGun Conference on October 8th that’s centered around conversion-centric design – Check it out)

THIS is the kind of design that very few people shop for– and indeed, don’t know how to shop for because they can’t “know it when they see it”. As I’d asked in a post WAY back in 2007 (“Do Designers Deserve a Seat at the Strategy Table“), when was the last time you saw a web portfolio that talked about metrics and goals? That talked about how the new design kicked the old design’s ass as far as the numbers were concerned? That talk about an X% SEO lift over Y months? On multiple occasions, I’ve seen uglier designs tromp prettier ones, and we can look at the aforementioned top sites on the web and see that it’s chock full of ugly.

One thing that’s important to note– the experts are wrong just about as often as they are right. As a self-proclaimed expert (!), this is hard for me to stomach, but it’s true. Check out this (somewhat murky) video of the head of Microsoft’s experimentation efforts. There’s plenty of gold here. First, he runs through a couple of design variations and asks the audience (chock full of startup geeks) to guess which performed better. By and large, the audience was wrong as often as they were right. Taking this further, Ronny tells is that the internal experts at Microsoft had similar luck. Said another way, the smartest people about UX and conversion made educated guesses, tested those guesses, and found that their efforts improved their target metric only SLIGHTLY more often than they made it worse.

Good Design = An unseemly mashup of Usability, Marketing, Credibility, and Usefulness

The problem gets worse, because “getting the job done” isn’t just about pure conversion mechanics and A/B testing.

• There’s design STRATEGY (most of the above is about tactical design). Is your designer the type of person who wants to have stategy handed down to him? Or is he the kind of person who is going to agitate for a 2-sided referral program? Or something clever like UrbanSpoon’s Spoonback effort?
• Are they thinking about marketing? Do they think like a user? Do they understand your market? Do they want to? Marketing isn’t just about outreach– there’s a whole discipline around understanding a market, getting their feedback (from user studies to poring through support/feedback email), etc.
• How do you deal with the conflicts between what your business wants the user to do and what THEY want to do? In my opinion, the best businesses have those goals perfectly aligned– but any ad supported site knows that their job is to find exactly how aggressive they can be with ads and pumping page views.
• What about SEO? Content sites need to optimize for SEO. Yes, the first rule of good SEO is quality and linkworthiness. But there are design/markup considerations, anchor text concessions to consider, and more.
• Load time. There are breathtaking studies about the effects of page load time and conversion. How many designers obsess about speed? Not enough, given that adding 2 seconds to page load showed a 4.3% reduction in revenue/user.
• Considerations vary wildly based on the type of offering. Sites that you use every day clearly need to be faster/leaner. Are there sites out there that can afford to be slower? Apple, for example, serves up enormous (and gorgeous) photography on their home page.
• Does the designer love writing headlines? Writing is one of the biggest parts of design– if they’d rather you do all the writing and prefer to work with Lorem Ipsum text, they have a big hole in their skillset.
• How much do they like saying no? At any company larger than a few people, designers meet the “too many cooks” problem fairly quickly. Good design is not only a bizarre blend of graphical, technical, marketing, strategic, and writing expertise– it also requires a healthy dose of political acumen and salesmanship. What are they going to say when Alice swings by their desk and says, “You know what? I think it’d be awesome if we had a block showing our twitter feed on the home page. Maybe with one of those cute blue birds at the top?”

The problem with hiring designers (and the reason that they so often don’t work out as contractors or employees) lies squarely on the shoulders of the people doing the hiring. They’re still looking at screenshots in portfolios and saying, “Beautiful! Wow! This must be our guy/gal,” when they should be looking deeper.

Continue Reading]]> A great developer I once worked with was kvetching at lunch one day. He’d been working at a well-funded startup for about a year and had come to terms with the fact that the startup was really a pretty dumb idea. He’d wasted a year of his life and had a pile of stock options that weren’t very interesting. His last two jobs had been similar. He asked me a question that, at the time, I didn’t have a good answer for. “How can you possibly know when joining a startup if it’s going to be successful?” In other words, how can you spot a good startup idea?

Since I’ve announced that I’m moving on in the coming weeks/months, I’ve been bombarded with cool offers at existing startups, larger companies, and, of course, I’ve been pondering some of my own startup ideas. So his question which I didn’t really consider very carefully at the time is now one that I’m thinking a LOT about.

So without further ado, here is my “checklist for good startup ideas”. No startup will do great on every aspect of the checklist, but this allows me to put startups/products to a sniff test that I think is pretty darn useful. Note, this list is in rough order of importance.

1. How deeply do you think the startup will effect people’s lives? Can you imagine them using it every day? Can you imagine them being royally pissed if they couldn’t use it? This can range from utility (gmail) to emotion (twitter), but if a product isn’t in the “I’d rather chew off my own arm than lose it” category for a meaningful percentage of it’s users, it should be a non-starter.
2. Are the hypotheses that form the basis of the startup tractable? In other words, can test the idea(s) in a short period of time? I’ve talked about the importance of tractability before (hat tip, Ev Williams). Bottom line is that most initial hypotheses are wrong to varying degrees. Twitter was very tractable. Tesla is not. I’ll re-use the money quote from Fred Wilson: “…Of the 26 companies that I consider realized or effectively realized in my personal track record, 17 of them made complete transformations or partial transformations of their businesses between the time we invested and the time we sold. That means there a 2/3 chance you’ll have to significantly reinvent your business between the time you take a venture capital investment and when you exit your business.”
3. How does the cost-of-acquisition, cost-of-goods-sold (COGS) and revenue-per-customer stack up? Most software startup have a pretty low COGS, so this question generally comes down to, “How much does it cost to buy a customer and how much revenue does that customer represent over their life?” This obviously requires a lot of guesswork early on, but experience is a helluva teacher here. If you haven’t been on the wrong side of this ratio a few times, find a mentor who has. Any way you slice it, you need to fine a “scalable, cost-effective way to get your customer’s attention”. I can’t count the number of startups that aimed squarely at small businesses or “prosumers” with sub-$100 price point and have no idea on how they’re going to buy a customer (other than word of mouth, SEM/SEO, and PR).
   
   I love extremes here. Zynga, Twitter, and Facebook has nailed one extreme– their cost of acquisition is free and nearly infinitely scalable. If you can build a service that grows virally (free and growing customer acquisition), you can focus most of your attention on value creation and revenue-per-user. With a little success there and a little time to let the virus spread, and you can almost not help but succeed. I think it’s hard to overestimate the power of free marketing/customer acquisition.

   There are certainly extremes on the other side. What do you think Oracle’s revenue per customer is? How much can they afford to “buy” a customer for? What about Groupon?

   Pro Tip: If you’re raising angel or Series-A money and you say you’ll be using the proceeds for things like magazine ads and wrappers on busses, you’ve probably already lost.

4. How MANY lives could you imagine touching in 5 years? This is different than asking about total addressable market (TAM). Craigslist started as a classified ads mailing list for San Francisco. Amazon started selling books. Have some imagination and consider what your company could morph into. Is it interesting enough to justify the opportunity cost and the fact that you’re looking at a drastically reduced salary for 2-5 years?
5. Is it an invention or re-invention? Hats off to you inventors out there, but I strongly prefer an existing market to creating one from scratch. The companies whose equity I covet didn’t build anything NEW, they just built something BETTER (Google, Facebook, Apple, Amazon, Craigslist, eBay, Zynga etc). In short, the first mover advantage is a crock of shit (most of the time).
6. Is it worth talking about? Can you tell a story about the product that would make a blogger say, “Holy crap– I could write a story around that that would get tons of links, tweets, and comments?” One of my favorite products is Visual Website Optimizer (it’s a brilliant A/B testing tool). The founder (a great product designer who I’ve had a few conversations with) sent out a barrage of emails to major tech bloggers and heard nothing but crickets (he appealed to Hacker News readers for advice– I think the discussion is interesting). His fundamental problem is that he doesn’t have a story that will drive links/tweets/comments/pageviews– all of the metrics that pro-bloggers care about. Oftentimes, clever PR people can create a story out of something that has nothing to do with the product (see: 37Signals & Zappos), but it certainly helps a lot if your product is funny, controversial, unusually useful, or inherently exhibitionist.
7. Are you passionate about the end-game? This one is hard to rank. All of the points above assume you are a “mercenary” founder (maximizing for opportunity) rather than a “missionary” founder (passionate about a vision that keeps you awake at night). Great video on that point here. Regardless of whether your end game is a vision realized or a big pile of cash (or some combination thereof), you need to be passionate about it… You need to have something that powers you through the bumps in the road where a rational person would cut and run. Both motivations are dangerous, by the way. If you’re motivated by cash, you might have a hard time sticking through tough times when you realize what you’ve built might only be a single or a double. If you’re motivated by vision, you might not like the pivots your startup needs to take to survive/succeed.
8. Is the market moving in the right direction? Can you imagine there being a LOT of growth and consolidation in the next 5-10 years? I just saw my first RedBox the other day (it’s a cool box outside of supermarkets that allow you to rent DVDs). They are currently on the wrong side of a market shift away from physical media– can you imagine people renting DVDs in 10 years? I think this one is particularly hard to get right (which is why it’s low on the list).

That’s my list. Am I missing something that’s on yours?

Continue Reading]]> 15 years ago, you couldn’t even BEGIN to look for a house without a real estate agent (who takes 6-7% of the purchase price from the buyer). Today, the internet has changed that. 10 years ago, someone starting a small business had to eat a cost of thousands of dollars to get a solid looking logo– often more if they didn’t want to roll the dice on just using a solo designer (of if their first designer didn’t create something that they loved). Today, a small business can get dozens of designers working in a public forum for $500. I think that’s AWESOME. But like real estate, there are casualties. And, like real estate, there is anger. But to me, “transactional design” (the kind of design that can take a few hours to net a good product and doesn’t require a lot of consultation) is an inevitable casualty of the global economy and the evolution of the internet (see 99Designs).

It’s a Global Village Now

I was in India for 3 weeks last year and was STUNNED at the cost of labor. We rode in taxis for the entire trip and spent less on them than the 1 way trip home from the airport in Seattle. Talented tailors would throw in manpower of tailoring a shirt if you just bought the cloth. If it’s unfair to pay $500 for a logo, was it unfair for me to pay Indian market rates for a taxi ride (usually less than a buck or two)?

The $300 bounty for a winning logo design is a kings ransom for a young designer in most of India (and the rest of the world). Guess what, Western world? You’ve got to compete– and Walmart has taught us over and over again that consumers aren’t going to pay 10% more (much less the 1000% more that an onshore hourly designer would cost) just so they can feel good. Some of them will- but most of them won’t. We can’t put the genie back in the bottle here. You’re better off trying to find creative ways to compete than bemoaning the unfairness of it all– it’s like a cottage seamstress complaining about the existence of the new textile factory down the road– technology changes markets.

For a rural Indian designer, entering 10 contests per week and winning one for $500 might be a huge win (and he doesn’t have to write a single proposal!). And that designer might be damned talented. How different is this than a services business investing $500k in sales effort on 10 different $10m RFPs and ultimately winning one? In fact, isn’t this just a different sales investment/risk than costly networking, proposal writing, advertising, etc., etc? Heck, the designer doesn’t even have to issue a Net-30 invoice– 99Designs drops the money to the winner pretty instantly.

So I’m assuming that the gripe with design contests isn’t that people are getting paid LESS than they used to, but rather that they could get paid NOTHING even after expending the time and effort of producing a logo. Which brings me to my next point:

Whether you are a Business or Freelancer – getting paid requires that you risk time and money.

If you want paying work without spending time/money or taking risks, you should go find a job with a paycheck.

My first business (a technology consultancy) was CONSTANTLY investing staggering amounts of money and time to get customers…. We had sales guys, who made healthy base salaries and some commissions. We went to networking events to establish relationships with people who could be customers someday. We took existing clients to lunch to chat about projects on the horizon. We sent out custom holiday cards to every client every year to keep us visible. We built and maintained a web site with a rich and updated portfolio. We had snazzy business cards that had to be kept up to date. We had really nice business clothes for the clients that cared about such things. We cooked up gorgeous custom proposal documents for customers– and these proposals required considerable analysis work and consultation with the customer (spec work!). We even responded to RFPs sometimes (rarely). All of these efforts can come up empty, of course. Many of them did, but in aggregate, my business grew like gangbusters. Software is no different. I heard that Salesforce.com spends 60-70% of their topline on sales/marketing. Much of that is probably wasted, but I’m sure they are in a constant state of making their marketing spend more efficient (just like 99Design entrants are probably in a constant state of gauging the kinds of contests that will net them the most bang for their effort).

In short, getting paying work cost TONS of time, money, and risks (how many freelancers do you know who average 100% billability in a 40 hour work week over a year?).

If you are a fresh-off-the-boat designer (or a rural one), you should expect your costs and risk here to be higher than if you’re not. You’ll have to invest more and get less as you build up relationships, your skills, and a portfolio. If there are too many designers eager for work (as I believe there are right now– the design world is NOT growing as fast as were churning out design grads), the market is going to make this harder for you. Don’t like markets? Get a paycheck-job or go learn Ruby on Rails (then you can fall out of bed and land on 2-3 lucrative freelance offers).

The nature of design

The best work general comes from seasoned professionals who engage in a deep discovery process, run through a lot of iterations, and work closely with the client. That being said, you can see flashes of brilliance without all of this, especially in the world of “transactional design”. Some of the stuff on 99Designs is GOOD. For a logo, book cover, or smallish web site design (especially for a smallish business) the difference in value received between a $30,000 engagement and a $500 contest is not worth $29,500. In fact, the contest might (on some occasions) yield better results faster. Even if it doesn’t, it’s CERTAINLY faster and can help with brainstorming. From a purely economic point of view, rolling the dice with a contest is a quick experiment to run that might yield exceptional results. I could design a good from-the-hip book cover in a few hours and it MIGHT be great… Design can be random and certain design tasks are 90% inspiration and 10% perspiration rather than the inverse. The bigger the design project, the less this is true, obviously. Again, I think logos (for small businesses) is the sweet spot.

Supply & Demand

As a business, we try to be as fair as possible with vendors, but we’re in business to be profitable. If I look at the winning designs on 99Designs and I generally like them more as much as any designer’s portfolio, is eschewing the cheaper option really the way to go? Paying bottom dollar prices CAN mean that someone somewhere is being exploited. I’ve seen no evidence that the 99Designs designers are exploited however, though it’s obvious that there are designers with higher costs of living in the US who simply can’t compete on transactional design services.

If you answered “yes, as a matter of principal” to the last question, how do you feel about internships (unpaid or crappy pay)? How do you feel about buying sneakers that were made in a Chinese factory with awful working conditions (check your feet, please)? How do you feel about the fact that the average Google employee generates over $1m per year in revenue but gets paid less than 10% of that #? Shopping for the best dollar-to-value ratio generally means that someone gets a disproportionate cut of the wealth in the transaction (even just a little bit)… Though are Google employees really getting screwed? Is an Indian designer getting screwed if she’s pulling down $20k year on 99Designs? And where is the outrage about things like iStockPhoto? Or 99Designs’ Logo Store? Is responding to a clear need in a design contests for a speculative chance at pay really that different from a photographer tossing up a speculative photo on iStockPhoto and hoping that someone might eventually buy it? The ones that have great photos make a ton of money. The ones that suck probably need to take photography classes. Heck, is it really that much different from my startup, where I spent a big (expensive) chunk of my live to launch something hoping that someone would want to buy it? Isn’t a startup in the “spec-work” category?

Design contests are a meritocracy in the extreme– good designers can probably make good money and (with a track record of winning and a great portfolio), eventually graduating to less-speculative lead generation if they so desire (though I bet GREAT designers could net thousands a day on 99Designs). Bad ones don’t and have to seek other marketing avenues or other lines of work. Again, welcome to business. Given the huge number of designers that enter contests OVER AND OVER again, clearly many have decided that they’d rather roll those dice than roll the dice associated with RFPs, Adwords, hiring salesfolks and other lead-generation efforts.

These are just some thoughts. As a designer, I’ve never done spec work (unless proposals count– they probably should). As a business, I’ve never asked for it… But from either side of the table, I’m not sure I have an ethical problem with it. So from one (admittedly kinda mediocre) designer to the rest of you– how are design contests “damaging” designers beyond the way that Google News is “damaging” newspapers?

Continue Reading]]> I don’t know a ton of important people. But as a founder of a venture-backed startup with some amazing investors and advisors, I do know a few.

With Nivi and Naval preaching the gospel of social proof (can I get an “amen”?!) and with fundraising posts and articles espousing the importance of introductions, it’s no surprise that about once a week someone asks me to introduce them to someone else. It’s especially common around Y Combinator Demo Day, where YC groups shift from pure product mania to fundraising mode. I’m pretty sure that YC tells new crops of startups to ask for introductions from the funded companies from previous sessions.

What does surprise me is how people ask for these introductions. Here’s pretty much how they usually read:

“Hey Tony. I’m [insert name] from [company name]. We’re starting our fundraising effort and I was wondering if you’d introduce me to [insert RescueTime investor/advisor].”

I usually will make the introduction, but the person asking for it is certainly not making the most of the opportunity (and asking me to spend my social capital by doing so). So after making a mess of these introductions in varied ways, here is my suggested checklist for making an introduction (it’s pretty much my reply when I get a request like the one above):

• Write the introduction for me. Seriously. You know more about your story than I do. You know the things to say that will make someone light up. I don’t. I might flub it. I can personalize it (“Hey [insert investor name]- hope your trip to [offensively exotic location] was fun. Welcome back! Listen, I wanted to introduce you to…”), but you should make the pitch. Bonus: this saves me a few minutes of writing, which is kind and thoughtful of you!
• Don’t bury the lede. What’s the thing that will get an investor excited? Be concise, but talk about social proof, traction, growth, size of the market, how badass your team is, mainstream press coverage, other investors who are on board, and user passion/joy. Choose whatever distinguishes your startup from the sea of startups that investors read about every single day. Unless your product is revolutionary, spend more time talking about your market (“we’re helping companies in the billion dollar widget maker market sell doodads”) and your team than your product (“we’ve got an ajaxy shopping cart!”). If they investor blogs or has EVER talked about their investment strategy, hopefully you’ve read how they think and tune your pitch to match that.
• Heap on the social proof, man! Getting an email intro from a near-stranger (me) is about the weakest social proof you can get (but it’s better than nothing). Tell us how many other investors you have soft-circled. Give us a link to a list of all of the blog posts praising you. Or all of the users tweeting about you. We’re herd animals. If the investor feels like the herd is leaving him behind, that’s a good thing.
• Think about why it’s an opportunity for investors. If I’m writing to an investor about a company that looks like a credible opportunity, that’s me doing them a favor. If you don’t have any bullet points that many you look like a great opportunity, that’s me doing you a favor and adding noise to their already overflowing inbox.
• Keep it short. All of the above stuff could mean a lot of content. You’ve got to pick and choose what to send and hope it’s enough bait for the investor to dig in and learn more.
• Bonus points: track it. When we were talking to investors, we created custom (private) pages for each investor we were courting giving them a ton more to dig through and get excited about if they wanted. The emails were short and sweet with a “want to learn more” link at the end. We used Google analytics to track which people clicked through and which individual pages they clicked on so we could know what to focus our discussions on when we met them.

All that said, if you’ve got a great investment opportunity (with a launched product and some happy users), don’t be shy about dropping me a line if I can help (with introductions or advice).

(post scriptum: If you are in the market for introductions, you should check out VentureHacks’ StartupList!)

(post post scriptum: If you’d like to learn more about making good introductions, Chris Fralic just wrote an outstanding post for the “connector” – The Art of the Introduction)

Continue Reading]]> My startup (RescueTime) has enjoyed some pretty ridiculously good PR (online, print, and video). It’s not a surprise that the most common questions that we get from other founders are about PR. How do you get press and the blogosphere talking about your product?

When you research this topic, you’ll see lots of technical and how-to articles that talk about how to build relationships with writers, how to use services like PRweb, how to format a press release, and more. In a lot of ways, this reminds me of SEO (search engine optimization). Research SEO and you’ll find a bunch of articles about page markup, link sculpting, meta descriptions, and all sorts of other mechanical processes. But what you won’t find much of is information that teaches you how to write great content and how to build your startup and features (from the ground up) with “linkworthiness” in mind.

Just like fabulous content solves 75% of your SEO problems, fabulous storytelling solves 75% of your PR problems.

I think there’s a lot of built-in contempt for PR and marketing among entrepreneurs (especially hacker-flavored entrepreneurs). We’ve all been in companies with fat communications budgets wasted by blow-hard marketeers, so many of us have dismissed the profession altogether. We’re so entranced by the concept that just building something people want will win the day. I remember cheering the first time I read the quote, “marketing is a tax you pay for being unremarkable“. I remember reading a statement on Hacker News that said, “my code speaks for itself“. Two years ago, I would’ve said, “Right on, brother! Preach it!”

But my mindset has shifted about 180 degrees over the past few years. I now believe that how you say something is at least as important as what you’ve built. The A/B testing and design/copywriting iteration that we’ve done over the past year (which has, over time, resulted in a 400% increase in conversion rate on our site) really has driven home this belief. What’s A/B testing if not a bunch of microscopic marketing/PR tests?

What you need to send to reporters and bloggers

If you’re reaching out to reporters and bloggers, you put yourself in the shoes of that person. They are looking to write a headline that causes readers to buy a magazine/paper or click on a link. They are looking to write a story to support that headline that causes readers to consume that content and (ideally) find the content so provocative (note that “provocative” can be VERY different from “valuable”) that they send the link to their friends and relatives, post it to Twitter, and write a supportive (or critical) write-up on their blog.

If you can truly empathize with a writer, you fairly quickly realize why your new social bookmarking app, web annotation service, or small business accounting app isn’t particularly newsworthy. You aren’t click-bait. You aren’t link bait. You aren’t going to sell a paper.

Which is why your most important problem from a PR point of view is this: How can you make your uninteresting (to a broad audience) company interesting?

The good news is that it’s quite do-able. If at all possible, read Made to Stick by the Brothers’ Heath. If you can’t read it, read this summary. If you can’t do that, just try to craft a story that succeeds in as many of these areas as possible:

• Surprising
• Funny
• Personal
• Has a story arc
• Useful

(notice how low “useful” is on the list? That’s not an accident. You have to be REALLY useful to be worth talking about.)

A boring company with good storytelling skills can do some amazing things on this front. Off hand, I can name a company that sells shoes online that did pretty well on the PR front, a personal finance app that a lot of people talked about, and a creator of small-business project management software that people can’t stop linking to. If you want to see smaller/earlier successes, check out Balsamiq or UntitledStartup (both are doing some clever things out of the gates).

So if you tell your product’s story at a party (which you should, over and over!), watch the listeners eyes. Do they glaze over? Or do they light up? Do they laugh? Do they argue with you? Do they ask questions? If a you’ve never had a listener at a party say, “wait a minute– John over there would LOVE to hear about this… Let me grab him!”, then you probably aren’t ready to work on the mechanics of outbound PR. If at the end of your story, the listener doesn’t often say, “Can you tell me that URL one more time?” as they reach for their smartphone, then you need to keep working on your story. Because charging forward on outbound PR with a shitty story is pretty much the equivelant of working on your SEO mechanics when you know you have crappy content. Your’e ignoring the most important part in favor of the least.

Post Scriptum – On the Value of PR

Having enjoyed pretty great PR success, I wanted to throw out a final thought. Like a lot of accelerants (marketing and funding being two other examples), PR can be like throwing gasoline onto a fire. Or it can be like throwing gasoline on a pile of wet wood. It can be especially exciting if your business is enjoying growth already. But PR (and, more broadly, your startup) is a marathon, not a sprint. The first couple times you get a PR hit, you’ll quite likely be flummoxed by the fact that your traffic and usage doesn’t really change that much as a result. TechCrunch might get you 5-10k uniques. Being in the print version of the New York Times might get you a few thousand uniques. PR is not going to result in a viral/word-of-mouth explosion, but it’ll speed things up nicely if you’ve already got one happening.

As Andrew Chen says in one of his many fabulous posts (why bloggers and press don’t matter for user acquisition), if you’re going to spent time on marketing and PR, spend it on things that will pay ongoing dividends rather than 1-time dividends. Andrew was talking about stuff like viral loops and SEO, but in my opinion he missed the most important marketing “gift that keeps on giving” – crafting and tweaking a story that makes you worth talking about.

Continue Reading]]> When I decided to take a weekend and focus on my blog I realized one big thing:

Most blogs are crappy products. And most of my favorite bloggers (the ones that espouse taking design, marketing, testing, and iteration have largely blown off the designs of their blogs To be clear, I think the quality of the blog is almost entirely measured by the quality of the content and not the theme. But blog success is a function of content quality and the ability to turn readers into people who retweet, comment, subscribe, or follow.

Success (whether it’s a blog or a product) is looks a lot like this:

Quality of Product * Success of Marketing * Conversion of visitors = Success

Certainly, outstanding bloggers (or outstanding products) can win on just quality of product. Some of my favorite bloggers (let’s single out Paul Graham (though I think he’d call himself an essayist), Dave McClure, Andrew Chen, and Eric Reis) have blog formulas that look like this:

(great writing = 10) * (great word of mouth marketing = 7) * (no clear call to action, no testing = 1) = 70 (pretty darn successful at expanding their influence)

(Note: McClure might get a -1 for too many font colors! )

My hats off to all of ‘em. They are better (and more prolific) writers than I. But we all know that a little A/B testing can go a long way. We’ve seen that a quick/dirty redesign of an already effective looking page can pump conversion by more than 20%. Hell, we’ve seen that a few iterations of Twitter language (leading to “you should follow me on Twitter”) can boost clickthru by 173%. Could a weekend’s (largely outsource-able) work double a visitor’s chance to become a follower/subscriber, comment, or even read a second post? If you’re starting point is a stock blog theme, I think so.

Here’s what I think you should do on a blog to maximize the 3rd part of the forumula above (and, to a lesser degree, the second part):

• Toss in some social proof. Assume people don’t know who you are and make it clear who you are and why you are important. You’re establishing credibility– why should anyone read what you have to say? Take a look at VentureHacks if you don’t know what I mean. Well played, sirs.
• Figure out what you want your visitors to do. Clearly, you want them to read your posts, but scribble out a stack-ranked list of the actions you want your readers to do and make sure your design supports that. If there’s crap on your blog that doesn’t support that (badges, widgets, etc) pull ‘em. Here’s my list:
  1. Retweet! No way a blog is ever going to have a viral loop, but if a reader likes what they’re reading and wants to spread the word, that’s huge– so encourage it! 1 subscriber is 1 subscriber. A retweet means hundreds or thousands of potential new visitors/subscribers. If my conversion rate on other activities is meaningful, this is my post important user behavior.
  2. Follow me on Twitter. This was a hard call to prioritize over RSS subsription, but I think a lot of people are turning to Twitter to replace their RSS readers. Feels like the right trend. Also, clickthrus on my posts on Twitter results in pageviews– it’s trackable. RSS isn’t.
  3. Subscribe via RSS. Makes it an almost certainly that they’ll at least see my headlines henceforth
  4. Subscribe via email. I dropped this to fourth because I don’t think most of my readership rolls that way, but it’s still a fine way to get content.
  5. Comment. Other than the “game of blogging” (i.e. maximizing reach, influence, audience), the discussion is the big part of why I blog. Bonus points, discussion makes a post feel lived-in and heaps on some more social proof. I’ve ceded the UX of commenting to Disqus, who thankfully does a badass job of encouraging conversation. Further, a comment gives me a chance to talk to the commenter (I almost always try to reply– take a look at Neil Patel if you want an example of a fabulous blog post. He always replies).
  6. Read a second post. In this world, I think getting someone to read a whole FIRST post is a great achievement. If people want to read more, I want to help them do that. But, heck– if they like my stuff, subscription/following on Twitter seems much preferred for both parties as a primary call to action.

Now maybe you could argue that a blog shouldn’t be treated this way. Maybe we’re all blogging to express our feelings, hone our writing skills, and be part of the conversation. That’s fine if that’s true. But look at the degree to which blogging has been instrumental in the careers of folks like the ones I’ve mentioned (as well as Fred Wilson, who says much of his deal flow is because of his blog) and it’s pretty hard to argue against trying to make your blog an effective funnel. Hell, at least spend a few hours and pluck the low-hanging fruit.

At the end of the day, every web site is a funnel and most blogs are pretty damn leaky. Take a weekend and plug some holes.

Continue Reading]]> In the past two months I’ve been on two different panels with other entrepreneurs. The first was at WTIA in Bellevue, WA (“Cashing in on Web Services“)– the other panelists were very clearly what I’d call “business entrepreneurs”. All of them had relatively successful funded startups, but not a one of them had probably written a line of code, moved a pixel, wrangled a server, or written a line of copy in months or years (some probably never had).

In contrast, the most recent panel I was on (at the O’Reilly Web 2.0 Summit) was with what I’d call “builder entprepreneurs”… All startups with great traction, some funded, but all of the founders were directly engaged with the creation of the product. They designed, coded, played sysadmin, and played all sorts of other production roles for their startups.

The contrast was startling, and it made me think hard about my earlier contention that the “business guy” doesn’t really have a useful role to play in the very earliest stages of a software startup. The first panel had a pile of examples of business guys leading startups to some significant (sometimes dramatic) success.

At one of the other panels at the Web 2.0 conference, Dave McClure (master of 500 hats and 473 font colors– and one of the smartest guys in the game) summed up the life-cycle of a startup in a great way. “There’s the product development phase, the market development phase, and the revenue development– or revenue optimization– phase.” Rings true to me.

So with this in mind, let’s track the value of a “product entrepreneur” over the early life of a company:

Now let’s track the value of a “business entrepreneur” over the early life of a company:

(note: I’m talking about one person’s ability to make a major impact with a startup– I’m not saying that either person is useless at any stage of the startup… And, of course, exceptions abound)

As I’ve said before, the business guy often doesn’t have a lot to do in the early stage of product development– especially if the builders are building something that they actually want themselves. If you’re a bunch of hackers building a simple photo sharing, you don’t need a business guy telling you what the market wants. Of course, if you’re a bunch of hackers building business time management software, you might well need that. Your mileage may vary.

But what I haven’t said before (and what I’m coming to learn) is that the product entrepreneurs have an increasingly marginal role as a startup evolves and becomes more successful. In fact, I’d argue that they are in a rude awakening– they either need to evolve into business entrepreneurs (as Gates and Jobs did, for example– both shrewd business guys) or hire people to play that role (a la Eric Schmidt at Google). Building an asset is the first (and most important) challenge. But finding the customer for that asset and maximizing the revenue/profit is also a challenge (and one that many builders are ill-suited to handle).

It feels like product entrepreneurs are oftentimes “cowboys”. Flying by the seat of their pants, they rally a small team to build a product that people want. It’s no surprise that this is really freakin’ hard and requires a mythical combination of brute force time and effort, insight, customer empathy, and a huge pile of luck. Saddling the product team with a biz guy who chases big customers and locks in the product direction too early can be deadly, as the Wizard points out:

This is one reason I hate to see very early stage companies sign a big customer before the product is baked. You are encumbered by product commitments and customer support before you truly know what the market wanted. You have to be passionate about a customer and the product when you should be laser focused on the product. The customer’s needs and your goals vis a vis the market may diverge. In an effort to show progress, however, the marquee customer is attractive in the belief it will help attract investment (and this may indeed be true). In a previous life before FeedBurner, my founders and I made the mistake of signing a big name customer to a paid monthly contract before we really knew what the product’s place in the market should be. Won’t ever do that again.

The product development phase of company needs product development people and precious little else.

But as the market development phase sets in, builder entrepreneurs are oftentimes increasingly obsolete. It’s no longer time to hurl features willy nilly at your users– you’ve already built something that they like. No you need to measure the hell out of it and turn it into something that they love. You need to iterate on it and turn it into something that confuses 4% of your new users instead of 7%. It means finding a way to tune your viral loop and conquer your SEO enemies to increase the organic flow to your product. And you need to start expoloring the market to figure out who they hell is going to pay for all of this. That means crafted adwords campaigns. That means cold calling. That means price experimentation. That means exploring the world of direct ad sales. Well, it can mean all sorts of things, depending on whether you are a free web service, a freemium product, a pure b2b play or some combination thereof.

But you are firmly out of the world of building products and drifting into the world of iterating a product and exploring a market. And, likely, you’re in the world of sales, marketing, and instrumenting the hell out of your app/site.

As Papa PG says, if you look at the leaders of successful tech companies you see more CS degrees than you see MBAs. That makes sense– geeks are critical to conquer the first (and most important) problem of a startup… Building a badass product. But if you look at these same tech companies, you see CS geeks who’ve actually set aside their geeky roots (though maybe not their geeky instincts) and become very very shrewd business guys. And you also see inferior products kicking the crap out of superior products through better sales/marketing/and distribution.

So to all of you builders out there… Beware! When you reach a challenge in the evolution of your business, the most natural thing in the world is to frame it as a product problem. “If we just build this new feature/product, we’ll be off to the races and we’ll never have to do any of that business crap!”. Keep your eyes peeled for the time when you have to personally evolve and start tackling business problems, or step out of the way and let someone else do it for you.