To the Mesh Mobile! Canada's Web Conference Returns

Stuart, Mathew, Rob, Mark and I are delighted to announce that the mesh conference will be returning to Toronto’s MarsDD this May 30/31, 2007.

We had a ball planning last year’s event and we’re just digging into the details for this years. In the meantime we invite one and all to join us on November 15th after 6:00 PM at the Irish Embassy for a mesh pissup (errr) meet up.

Ticket’s for mesh aren’t on sale yet, nor are many of the details available (ie. speakers, content, etc.), but you can expect a steady trickle of news over the next few months. Also, we’ve finally posted the podcasts of last years keynotes. I listened to a few of them recently and they are excellent – enjoy!

Read Mathew’s post. Subscribe to our mesh blog and please come join us in May.

[note: just a reminder … we sold out last year and I expect we’ll sell out again this year, so if you want to come, please do grab the feeds and stay tuned].

May Your Road Be Merry

Big news flash in the Canadian tech scene. Mark Evans – one of Canada’s best read bloggers and one of my mesh conference co-founders – has crossed over from journalism to running a start-up.

Earlier this week b5 Media received $2 Million in venture financing from J.L. Albright and Brightspark. Getting Mark to join the team will only enhance their credibility. Having worked closely with Mark in building mesh, I can tell you that Mark brings some intangibles to the table that would benefit any start-up. He’s energetic, and totally enthusiastic about what he does. He is also forthright and honest – important qualities I’d want in any team I would build. Mark also brings experience to the team as he’s left journalism to run a start-up before.

Good luck Mark – I’ll be rooting for you.

Don't Under Estimate the Significance of This

Yesterday I posted this on the FreshBooks blog:

Applications that use the web as a platform have the potential to begin an era of providing new value for their users…

All the users that profile themselves (e.g. tell us “I am a web designer”) will begin receiving useful comparative business metrics they can use to benchmark their business. For example, a web designer might like to learn:

  • What is the average invoice size for web designers?
  • How long does the average web designer take to get paid?
  • What is the average monthly revenue of other web designers?

We’re going to tell our active users their industry average AND their own average, so they can see how they stack up….Remember when you had to pay Forrester $1200 for a report like this? It’s times like this I catch a glimpse of how our service – and services like ours – will begin to move markets.

At first blush, you might say “big deal”. Mark my words – this is a *big* deal. Computing and knowledge like this is going to disrupt markets (i.e. Forrester). Stowe gets it. Take a second and ponder the implications with other sorts of applications. Let’s say you are a lawyer using Writely, you could get metrics on editing time for various classes of documents like shareholders agreements. Using the metrics gathered you could do a better time of projecting your resource allocation (i.e. time) and you could do a better job forecasting expenses for you clients which they will appreciate…or at least you could say, “well I based my forecast on industry standards…it’s *your* fault we went five times over budget”…you get the idea.

Huge value…mark my words.

Web Application Tracking Surprise

I just posted an interesting discovery on the FreshBooks blog – the post includes a really useful tip for anyone building a web app.

Check out the article, and consider what the reduced conversion rate implies about users and their disdain for marketing offers in their user experience. Paul Kedrosky wrote this on eBay’s decision to offer Goolge Adsense ads on their site:

“any high-traffic application that does not also run ads is passing up material revenues, and its shareholders should take it to task.”

To which I replied:

“I’d like to see more data on this. While you are probably right, when you run ads you give up realestate and make usability trade offs that may have more of a long impact on your numbers than may be apparent at first blush. eBay built eBay didn’t they? Part of the appeal for users has been lack of ads. Isn’t lack of ads a community first approach and therefore a good thing long term? I’d say yes, but again, I’d like to see some real numbers on this…and let’s not forget when google runs ads in their free apps, they have no middle man therefore their margins are not comparable (read HIGHER) than other apps who run Google’s ads….”

How do design distractions affect your bottom line over time…hard to calculate, but worth considering.

Managing Customers as Investments

I am working the spreadsheets this week and I am trying to quantify “the lifetime value” of a FreshBooks customer. In digging into that, I came across this excerpt from “Managing Customers As Investments“:

On average, a 1% improvement in acquisition cost improves customer value by only 0.1%. Improving margins by 1%, for example, by cross-selling, improves customer value by about 1%. This result is similar across firms and is consistent with the margin elasticity discussed in [an appendix]. Improving customer retention by 1% improves customer value by almost 5%. In addition, retention shows a virtuous cycle – the higher the current retention rate (e.g., Ameritrade’s 95% versus Amazon 70%), the higher the impact of improving retention.

Customer service in the services world – and I include web services in that world – is SO important. To some extent that belief has always been a gut thing; it’s great to find the research to backup your instincts. Here’s a good review of the book.

The Good News For Innovation: Google Went Public

So there has been a lot of talk about Google becoming the new Microsoft and how Google is suffocating innovation by carelessly stomping on emerging markets. Now I see eBay has decided pay-per-click ads on its sites.

So what’s the good news for innovation about Google going public? Just like eBay’s, Google’s investors are going to realize how much money Google is leaving on the table – and they are not going to be happy. Think about it… I’ve never clicked an ad from within my Gmail account. If they’re selling impression based ads (and I bet they are), then they make some money on my account IF I am a very active user. I’ll bet they don’t make $5 a month though, or even close for that matter.

So as Google moves into other applications, they are going to find there is far less revenue in running ad-sense ads. Why? I don’t know about you, but I am in my email all day long. No other application even comes close in terms of my attention or usage.

So… Let’s apply Google’s strategy to other applications – ones that are less commoditized than email, but the perceived value is higher. In those scenarios a user might generate $5-$10/YEAR in Ad-sense revenue – and active user that is. But because the perceived value added by the application is higher, that same user would be willing to spend $15/MONTH for the service.

Clearly, they will be leaving heaps of money on the table. Wall Street will tighten the vice. Paid services are inevitable atGoogle…especially when they enter the business space where many organizations want to pay the services they consume.

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.

What's the Big Deal?

We released our ground mail service today. Someone bought 100 stamps within the first 90 seconds. That’s a nice validation.

The real story with our release today is this: countless businesses that are STUCK in the old/offline world and trying to get to the web so they can leverage the benefits of the internet (cost savings, streamlined processes, improved client relations). Not many services are really assisting them with the transition, nor are many Web 2.0 services helping to facilitate traditional offline activities (Flickr offering to print and send photo albums is a nice example of someone who is doing this). I think there is a huge market and a huge need for services that help bridge this gap and do not simply turn their back on those users that need some aspect of their experience to be an offline experience.

Our ground mail offering is a nice example of where things are heading, and how companies like FreshBooks are empowering individuals and small businesses with tools that those individuals and small businesses could not otherwise afford to possess…more services will do similar things in the coming months and years, and I am delighted about this fact. That’s the big deal.

Marshall TechCrunched us here:

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 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.