Have You Seen This Before?

As posted on the FreshBooks Blog:

I’m about to coin a phrase, or make a fool of myself by describing a concept that has been around for ages. Hold on to your hats, here come my thoughts on “transitional services”.

Transitional Services are services that help facilitate a user’s transition from one platform to the next – or at the least, ease their pain.

Whenever there is a platform shift, there is transition, and straddling. For example, for the past ten years the photography industry has been shifting from celluloid to digital. The industry and its consumers are undergoing a transition from one platform to another. This transition has consequences. Many users are reluctant to transition because they are invested in the first platform (i.e. “I have cameras and film, slide projectors and photo albums”). Once the decision to transition has been made, users may want to bring their old platform content (think printed photos) with them to the new platform format (think scanning photos) and they find themselves at a point where they are straddling the new platform and the old. Both the transition and the straddling phases create pain and opportunity in the marketplace.

With me so far?

I wrote Paul Kedrosky a note saying I think there is a huge and growing market for transitional services in the Web 2.0. I pointed out how helping people get from offline processes to online processes – while helping to ease the pain of the straddling phase – will be a strategy that start-ups and established players can leverage and that I foresee an increasing number doing so in the coming years.

This whole conversation was sparked by FreshBooks recent release of its transitional ground mail service. The solution FreshBooks is selling is to help business transition their invoicing/receivables process online where significant benefits can be realized (streamlined processes, reduce costs, and improved customer relations). Businesses want to get online, but there is a world of pain awaiting them in the transition phase (“How do we build the service we need?”) and straddling phases (“How do we manage our cash flow when half our clients pay us online and half pay us offline?”)

That ability to gradually transition customers from ground mail invoices to online invoices and recurring billing is what FreshBooks offers, but there are other examples of businesses that help facilitate traditional office activities. You can create and send photo albums as gifts via Flickr. This is an example of a reverse transitional service where Flickr is facilitating a transition from the new platform (digital images) to the old (printing and mailing images).

What’s magical about all of this, and a hallmark of a transitional service in the Web 2.0, is how the line between the online world and the offline world blurs. The slicker the service, the more seamless the delivery, the more the offline world gets pulled online.

In terms of opportunities, I foresee more and more services leveraging transitional strategies and delivering transitional services as backend services and incremental revenue generators.

So, while none of these concepts is new, and the act of delivering such services has been around for some time, I have seen no attempts to define the phenomenon, so I have done it here. If this has already been done elsewhere, please let me know. As I have not had the time to consider the implications of transitional strategies as much as I would like, I encourage you to sound off with your own thoughts. Can you think or other examples? Better yet, can you think of industries in need of transitional services, where ripe opportunities exist? Please comment below.

Measure The Success of Your Web Application

One of the reasons I love web apps – and internet marketing in general – is that you can track everything. Gone are the days that you pay for a TV spot and *hope* it does something. The internet has brought a new paradigm of measurement for all things marketing and product use related.

It’s been a goal of mine to share my knowledge about running web applications so that others can be successful in building and growing their web services. In this vein I wrote a feature for ThinkVitamin.com that explains how you can measure the success of you web application. If you have any marketing background, the principles behind this piece will be old news to you. But I’d like to think there is some value in there for anyone, especially first time entrepreneurs who are building a web app. Check it out.

On a side note, at the time of writing this post I noticed there are no comments on the article. It only went live about four hours ago, but the thinkvitamin readers usually get their articles by RSS and are frequent commenters on articles (there are some on Digg here). For example, I have already received an offer to share application funnel data because I included this call to action at the end:

Shout out to those of you who run web services: I’d love to know how your conversion funnel is doing so that I can aggregate some data and share it with entrepreneurs who are trying to get started. Shoot me an email if you would like to participate. Thanks.”

What is interesting about that is I put no call to action for comments in my article. It’s my mistake and something I will learn from. As a rule of thumb, in any piece you write for a publication where comments are enabled, it’s a good idea to *ask* for comments, especially in this world where journalism is a conversation and your readers often have at least as much knowledge as you.

Pricing Web Services: Step 2 – No Annual Plans

A while ago I wrote a piece about pricing web services and getting them into buckets. I mentioned I’d write more so here goes.

Pricing is an incredibly hard thing to do. As I mentioned in the last post, getting things into three buckets is really important, so I want to talk today about yearly packages.

At first blush offering your customers a yearly option may seem like a great idea. For one, you lock them in for a year – this is good. For two, you have more cash right now – this is also good. There are two major problems with yearly packages though.

The first problem is too much choice. When you talk about getting your pricing into three buckets to make your pricing simple, adding yearly packages (assuming you are doing monthly packages in the first place) will double the number of packages you offer. So right out of the blocks you have 6 packages which is three too many. [Note: if you question this, read the pricing buckets post].

The second problem is the smoothness of your cash flow. Reporting, monitoring and improving monthly cash flow is much more manageable and consistent with monthly packages than when you try to manage yearly subscriptions. As a start-up cash flow is king. Demonstrating steady growth is key when you are talking with stakeholders. Monthly packages can derail your revenue reporting if you have a relatively high or low number of annual sign-ups in any given month. With monthly packages, these fluctuations and their effects are moderated.

I’m going to post more on pricing again in the future. By the way, Levi and I are presenting at DemoCamp 8 tonight. If you are there, please say hello.

Microsoft is Waking up a Little

Last fall I found myself thinking about Microsoft and their strategy a lot…I really don’t know why I spent so much time thinking about Microsoft, I think it was because they seemed so utterly absent from the activity (Flickr acquisition, delicious acquisition, etc.)…I guess they were the elephant in the room.

Last week HighRoad – Microsoft’s PR firm – invited myself and about five other Toronto area blogger/developers to meet the director of Microsoft Live, Phil Holden.

I gave the team at HighRoad my feedback on the meeting which was basically, “Why invite us over to see a bunch of your ME TOO apps?” Part way through I asked Phil, “So what is Microsoft doing that is new or different?” The answer (“tightened integration across all our products”) was frankly lacklustre, though I can see how having your contacts simply managed across your email, your cell phone, your social network is compelling. But will Microsoft allow you to easily participate in non-Microsoft social networks? A murky answer was given…almost a “Why would you need that?” feel to it, though Phil was clearly listening.

I’ll give the reason why they should allow you to move freely between networks for your future reference. Social networks and communities are only as good as the people within them. There will come a day when any given person will need to be a part of a very specific community. Let’s use a niche/vertical knowledge network as an example and let’s assume the network is not based on a Microsoft platform. If I can’t easily take my identity with me to that other network, it’s going to piss me off. So much so that I will probably never come back to Microsoft once I leave. If they made it easy to move out and back in, well then, I’d probably come back.

So basically they still have not learned to LET GO. They still want to tell you who you can play with. I would not hang out with a person who told me who I could associate with and held me back from joining a new group of friends…at the end of the day, it’s not very social is it?

Anyhow, the reason for this post was actually something totally different. The reason was the one really positive thing I took away from the day. As I mentioned, in the fall I had got my head stuck thinking about Microsoft’s strategy. Here are some of my posts from that time:

Microsoft Getting Disrupted – What is their Strategy?
What Microsoft can learn from the Xbox
Microsoft and APIs – The Only Strategy That Remains?

The one thing that Phil Holden said that really caught my attention was some numbers Phil shared. Basically Microsoft has about 350 million MSN users and 350 million hotmail users and 300 million unique users between the two services. Phil said Microsoft is going to focus on serving those 300 million. As someone who believes deeply in serving his users, and from years of consulting knows that your current clients are your best prospects for new business, I think Microsoft has settled on a strategy I can live with for now. Well done.

By the way, Tom Purves did a good write up of the session there…you can see me (beardless) behind Phil in the photo there.

Mark Vs. Mark – Is the Internet Boring or What?

Mark Cuban put up a great post this morning about how boring the internet really is. I think the main point he’s trying to make is that it’s not the “internet” that is new and exciting, it’s the applications that are so much cheaper and easier to build that are now changing the world:

Its the brainpower that is changing our world. THe internet is just a utility to deliver the digital bits they create.

I tend to agree with Mark Cuban because he is right about the countless cool new applications that are popping up mainly because of the low cost to build them, and not because of any remarkable breakthrough in the internet.

Mark Evans disagrees wholeheartedly with Cuban saying that there really are a lot of people out there that have no idea how powerful the internet has become:

Mark, it’s a nice rant but you can’t be totally serious to claim the Internet is more than “just a utility to deliver the digital bits” created by entrepreneurs or kids. To be honest, you need to step back from the fire and realize how many people have little clue about the Web’s capability and power.

Perhaps this is a Canadian vs. American viewpoint because in a lot of ways we Canadians are lagging behind the US when it comes to utilizing the web’s power.

Either way, I think both Marks agree that the explosion of creative and remarkably useful web applications being released every day are really good things, both for the consumer and the entrepreneur.

Open Source Communications

I’m in the Call For Help TV studio right now… I just did a segment on Tech TV about FreshBooks and I am about to do a segment on marketing software online.

In preparation for the show I did some research on the host, Leo Laporte, and came across this interview on Mad Penguin.  Leo talks a lot about open source platforms vs. Windows platforms and the IBM platform era that came before.  He does a nice job of explaining how the sheer POWER of having people working at something they love for all the right reasons (READ: open source developers) creates a better product than people who are working for someone else while someone else benefits big time (READ: Microsoft employees).  Okay… nothing new.

What got me going was how he equated the platforms to government (i.e. Democracy vs. totalitarian rule).  In this scenario he describes how countries like China are going to extraordinary expense to restrict their peoples’ access to the internet, and thereby not allowing them access to masses of information.  Allow me to reiterate: they are going to EXTRAORDINARY EXPENSE.  AND he points out that that carrying on like this is unsustainable: the model will break.   I agree.

So… let’s switch gears and think about corporate communications for a moment.  Traditionally corporations have been totalitarian states.  Remember when the only source of news was a newspaper?  Remember when the radio came around?  Then TV?  Gradual change.  Each of these are broadcast media where companies can control their message and basically their message was the God’s truth because…well…there was no other message…and they had TOTAL CONTROL over that solitary message.

Then the internet happened.

What is the significance?  The corporate message is now being shaped by users/consumers/fans/participants much like open source software.  Why is it like open source software?  Because people not companies are using tools like blogs and podcasts and web sites and email to create the message and shape the message…and there is no stopping them from doing it.  In fact you shouldn’t want to…you should be thrilled they are taking their time to even bother with you.  You should support them as much as you can, engage them when it’s natural and LISTEN to them – that is the big thing.

I was on a call with one of our customers the other day (we set up calls to talk to them because we value their input and take it to heart every day).  This caller referred to our users as our “virtual board of directors”.  Perfect, and absolutely right.  They are that valuable (i.e. like advisors).  They have that kind of influence (i.e. like a board).  The feedback they give us and the blog posts they write shape our direction and help us sculpt the communications we do. So…like the open source movement, which relies on remote software developers to craft the software, our remote users sculpt our communications in a very natural and organic way.

Open source communications is the way from here on in.  That’s a good thing.

Adwords Help from the Master

As part of our initiative to deliver helpful resources to our FreshBooks users, this Thursday at 1:00 PM I will be hosting a tele-seminar with Andrew Goodman.  Andrew is THE Google Adwords expert and the author of “Winning Results with Google AdWords“.

Any start-ups who are thinking of using Adwords, or looking for some guidance running a campaign, can join in on the call.  The call is free to attend (but you have to pay your long distance rate if one applies).  Feel free to tell any small business owners or web designers or service providers that you know about the tele-seminar, all that we ask is that you sign up in advance so we can gauge our numbers and buy the correct number of phone lines.  Thanks.

Here are the details and more information about Andrew.