Category Archives: Web 2.0

Making money in the app store

03 Wednesday Mar 2010

Posted by in Mobile, Web 2.0

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So I finally got an iPhone (yeah, I know, I know…).

I considered writing a post about the pros/cons of it, but there are just too many of those and frankly, we all already know what they are (I still can’t type well on that thing).  By far the coolest thing about it is the App Store.  While the app discovery interface is incredibly bad, the sheer number of cool apps is amazing (as you already know).

The thing that has me scratching my head this morning is how to make money in the app store.

It used to be that consumer software was purchased and installed.  The software company created new versions from time to time, hopefully enticing you to purchase the latest and greatest.  Support was either really cheaply provided or was charged for.  In essence, the software company had little to no ongoing costs associated with previously shipped versions (occasional bug fixes were it).  Ongoing revenue was from upgrades and new user acquisition.  The company I work for (Intuit) is still partially there.

Then there were subscription models. Ongoing service for ongoing fees. Simple enough and very effective.  My previous company (Homestead) did this all day long.

The apps in Apple’s app store (and I imagine every other mobile device’s app market) are a different financial model altogether. Case and point: my current #1 time waster, Words with Friends.

First, the model starts simply enough: it’s free with ads, and you pay $2.99 to get rid of the ads. OK, while the price is high relative to what most apps cost, this is a model proven to work. Check.

Then, it gets a bit strange. This is not a standalone application but includes a service that connects you to friends so you can play socially. That means we are getting ongoing services (and the company is incurring ongoing costs) with out any ongoing payment.  Would the market accept an ongoing subscription to play Words with Friends?  I don’t know, but it’s not prevalent in the culture of the app store currently to charge a subscription fee for a game.

Then, it gets really interesting. Again, this is a social game where the company is paying for servers for the game communication. That means that while their revenue grows linearly with the number of users who play, their costs grow linearly with the number of connections in the graph (the number of games played).  Net results: their costs grow exponentially (roughly) as their revenue grows linearly.

The assumption has to be that the company makes enough money in the linear revenue to offset the exponential growth of the cost.  I hope that’s true because I love the game.

But put it all together:

  • You have a game that some users buy for $3 not monthly, not annually, but once. Ever.
  • You have ongoing costs associated with maintaining servers.
  • You have costs that grow faster than revenue.

In the short run, it works.  But in the long run, what’s going to happen?  At some point, revenue from the game will start to decline but costs will continue (fewer new users buy it, but existing users still play it).  And at some point, it will become unprofitable for the company to maintain the servers for this game. Maybe they’ll shut it down, or more likely, try to move to a subscription model ($3/year?).

Clearly, other models work (e.g., Zynga), but I think this one in particular needs work to survive in the long run.

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QuickBase opens up to developers

16 Wednesday Apr 2008

Posted by in Intuit, Software Development, Technology, Web 2.0

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So I’ve been an Intuit employee now for a little over 3 months.  And I’ve met a ton of really passionate, intelligent people. It’s been quite a wild roller coaster ride and is the primary reason why I’ve been so negligent in my blogging.

TechCrunch picked up on QuickBase’s foray into being a developer platform and it’s great hit.  And here’s why:

If there was any hesitation about Homestead joining, it was because Intuit isn’t what you’d typically call an “Internet” company.  Our bread and butter is desktop software; when was the last time you saw TechCrunch or GigaOm write about QuickBooks?

But the QuickBase guys (I’ve met with several of them) are passionate about being on the leading edge of the Internet space.  They’ve never been on the desktop.  They’re pushing RIA and rapid development and open interfaces and all that the Internet is about these days.  You know, “Web 2.0”.  And at the core of it, they’re about providing value to users.

And the fact that TechCrunch picked it up is a great sign that Intuit’s moving in the right direction.

So congrats to the QuickBase team for a great hit!  And here’s to Intuit making more splashes in the blogosphere!

Selling a car: Craigslist vs. Autotrader

14 Monday Apr 2008

Posted by in Technology, Web 2.0

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Count one for the good guys.

I recently sold my Toyota Solara Convertible (going for a sweet, rockin’ minivan) and posted both on Craigslist and Autotrader.

I’m sure it doesn’t surprise you that Craigslist kicked Autotrader’s butt in generating legitimately interested leads, at least here in the uber-connected Bay Area. 

The tale of the tape (Craigslist vs. Autotrader):

  • Cost: Free (duh) vs. $69
  • Online pictures: 4 vs. 18
  • Magazine ads: 0 vs. 1 (I assume, I never saw it)
  • Times I had to post: 4 vs. 1 (CL expires after 7 days, AT doesn’t expire)
  • Actual interested leads: 9 vs. 1
  • “Spam”: 0 vs. 4 (I got 4 calls from businesses who want to help me sell my car)

Even though the ads on Craigslist are free (and therefore, unqualified), the search functionality minimal, and the ads poorly formatted, CL was far and away better than AT.

But you knew that already.  Count a victory for the power of a trusted, “social” classifieds system over the old school advertising system.

MySpace vs. Facebook

25 Thursday Oct 2007

Posted by in Social Networking, Technology, Web 2.0

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The buzz continues with Facebook picking up another half a billion dollars today at a $15B valuation, or an amazing ~100 times estimated revenue.

MySpace is trying to defend it’s territory, and in raw numbers it’s still kicking Facebook’s butt. Here’s some interesting data touting MySpace’s might.

It’s astounding really.  It’s easy to jump in and gripe about how ridiculous the valuation is but it’s not totally out of the realm of possibility.  But clearly, Facebook would have to be beyond Google-ish in it’s growth to make it reasonable.

I think an early Internet growth company should get a valuation of somewhere around 20-30 times revenue, and a mature company should get somewhere around 10 times revenue.  Even Google, who is still growing like gangbusters, is incredibly sexy, and swathed in hype, is only worth 14 times revenue.

Facebook is early enough and is growing fast enough that it’s revenue should be growing at more than 100% per year.  At 100%/year, for two years, they would be at ~$600M/year.  Then, they’d have to stay at the 70-80%/year growth rate that Google has to warrant the 14 times revenue number.  And that’s just to justify $15B; by the end of two years, I assume MS and the other investors are hoping it’s worth $30B.

Can they do it?  That’s going to be really, really hard.

Web 2.0 Expo: SEO and SEM

30 Monday Apr 2007

Posted by in Technology, Web 2.0

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I left the Web 2.0 UI workshop and jumped into the last hour of the SEO/SEM workshop.  I probably should have been in the SEO/SEM the entire time instead.  I figured I knew much of what I needed to know about the SEO/SEM space, but the guys up there (from Range Online Media and Web Guerilla) seemed to have some good tips and good experience.

The most interesting thing they had to say (in that last hour I saw them) was that most sites/companies are far too afraid of pissing off the search engines and so they follow the web master guidelines too closely.  They said that we should just push the limits; specifically we should just cloak.  Yeah, just get over it and serve specific pages to bots (as identified by user agents).  They go so far as to serve specific pages to bots as identified by IP address.  Interesting.  I’m ready to give it a shot…

Update: Here are some other tips that come from my notes:

  • Best/Worst kept secret: Yahoo Search Submit Pro.  Use it.  It’s gray tactics that you can actually use, and it works!
  • A lot of the on-page tactics are ones you’ve all heard before:
    • Title tags
    • Meta tags
    • H1 tags
    • Get rid of query strings
    • Get quality links
  • And finally, check out the SEO presentation.  Definitely some interesting stuff.

Web 2.0 Expo: Measuring the Participatory Web

18 Wednesday Apr 2007

Posted by in Blogging, Technology, Web 2.0

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I love data.  Data rocks and solves a lot of problems.  It removes (mostly) foundationless opinion, emotion, and spin from arguments.  And that’s why Tuesday’s keynote about measuring the participatory web has been the best thing of the conference so far.  It was chock full of fantastic data from Bill Tancer at Hitwise  and Dave Sifry from Technorati.

Some highlights (with my comments):

  • In the last year, visits to participatory web properties (like YouTube, MySpace, etc) went from 2% to 12% of all web visits.
  • Visits to Wikipedia outnumber visits to the leading “normal” online encyclopedia Encarta 3400 to 1.
  • Participatory photo sites (like flickr, photobucket) make up 56% of all photo site traffic; photobucket makes up 40% (but I assume that’s before MySpace cut them off)
  • Obviously, not all visits to participatory websites are actually participating, but the numbers are smaller than and varies more than you would think.
    • YouTube: 0.16% of visits upload a video (much lower than I would have guessed).
    • Flickr: 0.2% of visits upload an image.
    • Wikipedia: 4.59% of visits are edits (much higher than I would have guessed).
    • What is the percentage of commenters on YouTube?  Much higher, I would think, but still…
  • Editors at Wikipedia skew disproportionately with age, and propensity to edit grows strictly with age. I.e., 55+ year olds are much more likely to edit than 18-24 year olds.
  • YouTube is slightly different: middle age users have the highest tendency to post (35-54 year olds).
  • Editing/posting also skews toward males: Wikipedia 60%, YouTube 76%. Visits are split very close to 50/50 on gender lines.

Now here’s the most interesting part of the presentation. Some company (Claritas, as it turns out) has separate the people on the web into a bunch of different demographic categories.  Hitwise has tracked people in these categories and there are three that are predictors of the next big thing; i.e., the big properties of the new web (like YouTube) were visited by these three groups before they made it big.   The groups are called:

  • Money and Brains
  • Young Digerati
  • Bohemian Mix

And who are they visiting now; who are the “next big thing”s?  In order:

  • Yelp
  • StumbleUpon (just bought by eBay and targeted by Google)
  • Veoh
  • WeeWorld (disproportionately “Money and Brains” because they tend to have kids)
  • Imeem
  • Piczo

Fascinating stuff.

Dave Sifry of Technorati also showed some interesting stats on the state of blogs out there.  Most of the stuff was in this blog post.

The most interesting thing is that Japanese is now the most popular language for new blog posts, accounting for 37% of blog posts that Technorati tracks.  That is amazing in my English-centric world view, especially when you consider the number of people in the world who speak English vs. the number of people who speak Japanese.

He also gave hope to us “long tail” bloggers who get no traffic. 88% of the top 100 blogs as tracked by Technorati are different than they were last year, so the top blogs are changing all the time.  Just keep at it…

Web 2.0 Expo: Making web apps work offline

17 Tuesday Apr 2007

Posted by in Technology, Web 2.0

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I attended the presentation on the new Dojo Offline Toolkit given by Brad Neuberg.  It was a little too pitchy, but accepting that, it was very informative.

Homestead has a very extensive AJAX application (SiteBuilder Lite) and making that work offline well might help us eventually retire the downloadable and installed SiteBuilder LPX app.  The quick rundown of the practical options:

  1. Adobe’s Apollo: A lot of splash from this one, including several sessions given by Adobe and even a keynote about it.  Brad’s thesis is that users don’t want a separate install, that they want to work in the browser.  Frankly, I don’t think they care; they care that it’s easy to install and that it works almost exactly the same as the online version.  And technically, I just want a single code base providing the functionality.  Apollo may provide that.
  2. Slingshot: This platform allows you to take Ruby on Rails apps offline.  Brad argued the same thing: that users don’t want a separate application, but just want the browser.
  3. Dojo Offline: I do think it’s pretty cool.  It’s made up of a JS library and a 300K installed runtime that acts as a standard local proxy, actually proxying the host names it cares about, providing access to local caches of otherwise online web pages, local file storage, local data storage, and syncing behavior.  It’s really interesting and deserves investigation.

Practically, I think both Apollo and Dojo are great possibilities.  When it comes down to it, adoption will come down to the same things it always comes down to: ubiquity of the runtime and developer mindshare (will it be easy for developers to build on it).

Again, it’s hard to see Microsoft completely ignoring this arena.  I would surprised if MS did not come out with a well-fleshed out web app framework with built-in support for working offline.

Web 2.0 Expo: Launch Pad II

17 Tuesday Apr 2007

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Note: I took these notes in the morning during the keynote, but I couldn’t get on the WiFi so had to write it in Notepad.

Again, just like Launch Pad I (during Day 1’s keynote) with WebEx, since when was TellMe a startup? Like 8 years ago?

Swivel: Maybe it’s just a bit early for me, but I don’t think Swivel did a good job getting their point across. It’s something about “freeing data” so the world can use it.

Vidoop: They’re trying to make passwords obsolete by having users pick images in categories instead of typing in a password. It’s an interesting idea, but I just don’t see it as being easy enough to really take over passwords. I got a demo from them in the Expo Hall last night, and they said they only have 36 categories to choose from (probably because 26 letters + 10 digits), and it seems like most users only pick 2-3 categories. (Of course, you could pick more, but you’d have a hard time remembering them.) I just don’t see it happening.  For some reason, many people seem to love it.

TellMe: OK, so TellMe isn’t a startup, and they were just bought by MS, but that’s an awesome demo. They’re adding business search to the already very useful 800-555-TELL, and now a voice recognition app that can be installed on the phone. If it works as well as Google Maps for Treo, I’m sold.

TellMe is the clear winner in this group for me, but apparently the attendees here are evenly split among the three.

Update: I went to the booth and no, the TellMe phone app doesn’t work on the Treo yet.  Sucks.  But, mommy, I want it now!