End of unlimited mobile data plans

Late September, GigaOM held its Mobilize conference in San Francisco.  Over the next couple of posts, I will talk about the trends that were discussed during the conference.

Cable companies like Comcast are starting to limit internet bandwidth.  Mobile is following the trend.   AT&T got rid of its unlimited data plans.  People are moving from mobile content consumption to mobile content creation and participation.  By 2014, 66% of mobile data will be video alone.  Are the days of unlimited mobile data plans gone?

At Mobilize, the wireless heavyweights T-Mobile, Sprint,  and Alcatel-Lucent talked about the latest in mobile data trends.

Let’s look at numbers for T-Mobile:

  •  over 200M American subscribers
  • 4G is the largest than any other carrier in the US
  • this year 2Q, 75% of devices sold by T-Mobile are smart phones
    • 90% of smart phones are Androids
  • data traffic doubling every six months
  • 10M 3G & 4G phones make up 15% of total T-Mobile phones
  • Smart phones make up 1/2 of data traffic
  • T-Mobile has stepwise pricing for data plans, usually next level is $10-15 more
  • Many consumers want monthly plan, not annual contracts

If the other wireless carriers resemble T-Mobile, we are looking at a rapidly growing trend of smart phones and mobile traffic that will exceed network infrastructure capacity.  Sprint says they have to drop operating network costs 90% per year.  Before, the network infrastructure was built for voice, now they are optimizing it for data.

To help cut costs, wireless carriers are constantly monitoring data usage and looking at ways to charge customers.   Some are looking at charging differently based on data transmission speeds, “Not every bit is created equal”.

Another way to combat costs is to go higher up the stack.  Wireless carriers think app developers and them need to work together to ensure a good user experience.  Imagine apps bundled with the pricing of bandwidth so that users do not need to figure out what data plan they need in order to use an app.  There are opportunities for middleware solutions that will help apps manage the network usage.  Squeezing more bits is going to be a profitable space.

May the best apps that manage data well, optimize battery life, and have fast performance win!

Mobile, will you marry me? Get engaged!

On 9/26 Monday and 9/27 Tuesday, GigaOM held its Mobilize conference in San Francisco.  Over the next couple of posts, I will talk about the trends that were discussed during the conference.

Unless you live under a rock, it’s hard to ignore that mobile advertising is exploding.  According to Smaato, mobile advertising is a $11.4-$20B market in 2011 alone.  At Mobilize, AT&T Interactive, Kiip, Pontiflex, and Appsfire grabbed the stage to talk about this hot topic.

The current landscape of mobile advertising is still evolving.  One panelist said it took about a year ago for ad networks to target ads based on location, previously it was just based on clicks.   Imagine the days before Groupon and LivingSocial.  Pontiflex and Kiip say about 48-60% of mobile ads are clicked on accident.  Some app developers are gaming the system by putting ads right next to frequently pressed buttons (e.g., pause button).   This implies about 50% of your mobile ad budget is wasted.  A big challenge is that the definition of engagement has a wider range of possibilities than web advertising.  Is engagement a call to the store?  Entering the store (offline/online)?  Measure on size of (offline/online) purchase?  Use of a coupon?  If Google Wallet catches on, Google will be able to track ads all the way down to the point of purchase in a brick and mortar store.

One company Kiip focuses on achievements as a cost of engagement.  For example, when a player completes a level, they will show a mobile ad at that very moment.  For a BestBuy campaign (assuming because it was described as a yellow large electronics retailer), Kiip got a 15% conversion.  They believe that people will want to “engage” when they are in a happy moment.  In fact, they are working with experts in cognitive and happiness to improve their service.  Appsfire is at the promotion level.  AT&T Interactive is doing search advertising.

Mobile advertising can be helpful and it’s not all bad and intrusive.  An example coming from web advertising, when Google took off its ads off of the websites, people complained because the ads were useful.  Pontiflex says when it comes to mobile advertising, there are three major groups involved in order to make mobile advertising a success – ad networks, app developers, and users.  You can’t ignore any of these groups.  Appsfire says you have to trust app developers to know where to place the ad and give them flexibility.  Most importantly, you have to let users figure out how they want to engage with you.  For example, 1 in 5 do not want mobile coupons.

Tips for app developers, you need critical mass with make money with ads.  If you have local mass, it’s even better because a lot of mobile ads are local.  It helps to have your app translated to other languages too.

Mobile strategy to not be ignored

On 9/26 Monday and 9/27 Tuesday, GigaOM held its Mobilize conference in San Francisco.  Over the next couple of posts, I will talk about the trends that were discussed during the conference.

One hot topic was mobile development strategy mainly around designing for better adoption and technology choices.  The people speaking on the topic were from SalesForce.com, Verizon, MeLLmo, and Rhomobile.

Companies need to create a completely different team focused on mobile development and not use the existing web development team.  The differences between web and mobile development are big enough that one panelist said you will fail if you use the web team.  Another panelist urged companies to rethink all of their development processes and products from the ground up, especially to be based on simplicity like mobile apps.  Do.com (part of SalesForce.com) designed for the tablet then made the web look like it.

When designing a mobile app, companies should think about the end user (whether customers or employees) as people have lower tolerances for bad mobile apps.  At Verizon, they create storyboards about the end user experience and then develop apps from there.  At SalesForce.com, they put a lot of emphasis on personas and develop workflows.  Features such as disconnected/offline capabilities, refreshing part of the app (not the whole app), and a lot of drag and drop (for tablet apps) make for a good experience.

The verdict is still out about native vs HTML5 as the panel was mixed on their recommendation.  Some are hedging their bets like SalesForce.com who is building native and HTML5 apps.  Another panelist says you can go native but leverage HTML5 (like a iOS webUI view).  Using webUI is not the same as native in my opinion although it is an easy way to say to go “native”.  The big supporters of HTML5 said that a native interface can be mimicked with HTML5.  One disagreed saying not all of the great native interfaces are available.  The big advantage with HTML5 is that it is not locked into any mobile OS and you can design once and make it available for all mobile devices.  I agree with the theoretical strategy, but the HTML5 app will be restrained to the limits of the mobile browser, still in its infant stage.

All the panelists seem to be on the same page that leveraging the native features of the phone/tablet are important for the user experience.  One panelist said that you can’t have a high performing app unless you go native.  This statement is correct as of today, but companies like Google are pushing for improved mobile browser standards.  The debate continues…

One tablet, phone for work and play

On 9/26 Monday and 9/27 Tuesday, GigaOM held its Mobilize conference in San Francisco.  Over the next couple of posts, I will talk about the trends that were discussed during the conference.

One of the hot topics was the disruption of tablets and personal smart phones in the workplace.

Tablets and personal smart phones are making their way into the business space whether the company encourages it or not.  This uncontrollable trend is consumerization, devices becoming popular in the consumer space then moving into the business space.  One panelist observed that more people today are carrying just iPhones (both work and personal) than 6 months ago when they were carrying both Blackberrys (work) and iPhones (personal).  The surge of tablets in the workspace is a push to get more business-oriented, customer-facing employees to be more efficient and mobile.  At Salesforce.com, all sales people carry iPads, no one carries a PC.

With the convergence of personal and work devices into one device, companies like VMWare and Cisco are looking to figure out how to separate (e.g., expense, secure) corporate data from personal data.  Cisco believes that security should be built into the fabric of the network (e.g., containers).  The end point (e.g., devices) can change all the time.  They say that a MacAfee or Symantec solution is not enough.  VMWare is looking at ways to virtualize corporate phone images to personal phones starting with the Android platform, working with LG and Samsung and others.  They are even looking at virtualizing two sim cards so that you have two different numbers on one smart phone.  Imagine getting a ring tone that is different based on whether it is a personal or business contact.

Companies are realizing that they can’t stop people from using their personal devices.  They are embracing the idea of people using personal devices for work and play.

GigaOM Mobilize is an event to not be missed next year as it is full of who’s who in the mobile space.

The untold story of Posterous

Sachin Agarwal on left

There are a lot of blogging sites out there – WordPress, Blogger, Tumblr, and then there’s Posterous.  Sachin Agarwal, founder of Posterous, told a story which seemed to be a collection of happenstances.  At a talk last Friday, Agrawal talked publicly for the first time since Posterous spaces launched.  He started by saying that he will be talking about things that he hadn’t shared before.

Agarwal describes himself as a backend engineer guy with no frontend and web programming experience and not a product guy.  So how does a former Apple Final Cut Pro developer start a blogging website?  Now comes the problem and the solution.

He wanted to easily upload photos to his blog via email.  So he developed the function just for him to use.  Eventually, his friends and family liked the function and it caught on.  This led to him getting into Y Combinator and then launching at TechCrunch.

People were calling Posterous blogging by email or easy blogging.

The 3 main innovations that made Posterous unique:

  1. The ability to email one email address to post to your Posterous site.  This came about because he didn’t know how to set up an email server.  Unlike other blogging sites, you did not have to send emails to an obscure email address like 123abc@WordPress.com.
  2. It’s very easy to set up a new Posterous account.   He didn’t want (or maybe didn’t know how) to create a registration page.  If a sender email address is not recognizable by Posterous, then it will assume it’s a new account and create a new Posterous account.
  3. When you post to Posterous, it’s easy to post to other social accounts.  No story here.

Posterous had two main products – sites and groups.  It started to confuse people especially new users.  Also, over time, Posterous team started to notice a lot of people creating private blogs and add contributors.  The idea for spaces came from this.  It is a way to simulate how people share privately through email, but with Posterous hosting the site and archiving the data.  Unlike Google+ and Facebook, Posterous sharing is symmetrical, everyone in the posterous space can share with one another equally not just sharing by fanning out to contacts (asymmetric).  Tip: Monitor how your users interact with your product.  There may be an opportunity to capitalize on unforeseen patterns.

Posterous had a lot of design debt and they were faced with keep the old or go with the new.  For every new feature, a button would appear.  Existing customers were happy with this approach, but new users didn’t feel the same way.  Tip: Top talent do not want to work with outdated technologies (e.g., older versions because of technical debt) and confusing code.  Tip: Technical debt will make your website slow “like Friendster”.

In a bold move, Posterous decided to scrap everything and start from scratch.  This decision was mainly driven by the technical debt that they had accumulated over time.  For 6-8 months, they  spent time building a new Posterous focused on mobile, email, and controlled sharing.  Nothing was sacred, any feature can go if it didn’t make sense.  The entire company can participate in the redesign.  Tip: The whole company / team must be onboard for such a dramatic change to be successful.

The strategy was to redesign the mobile site first.  The goal was to complete one screen a day for 30 days (total 30 screens).  Someone would make the screen and send out for immediate feedback.  At Posterous, the mobile and web developers are on separate teams.  It just so happened that while the mobile team redesigned the mobile site, the web team built the backend APIs.  Agrawal said it was an accident in terms of efficient resource allocations.  After the APIs were completed, then the web team worked on the website leveraging much of the mobile redesign work.  Agrawal believes that the mobile and web sites should look and act the same.  Tip: Consider developing the mobile site first before the website so that you focus on simplicity and performance.

During the process, Posterous spent a bit of time getting user feedback.  To get users, they posted ads in Craigslist, vetted out candidates using Wufoo forms, and compensated them afterwards.  Twenty-four hours after a user session, they would whiteboard a new design and get a working prototype 3 days later.  They saw trends pretty quickly with just 3 users.  One thing that Agrawal wished that they had done was bring in more existing users for feedback.  Tip: Don’t alienate your existing user base who made your company.  Well the only exception to the rule is if you are going after a bigger, different market and abandoning the existing user base.

When they finally rolled out the new “spaces” Posterous site, it had already been running internally and for select users publicly.  It was just a matter of turning on the switch for everyone.  Tip: Many companies do the best practice of testing company-wide internally before launching publicly.  Employees get the benefit of learning the new product and the company gets user testing by different types of users.

I admired Agrawal for being candid about the things that led up to Posterous and then to spaces.  I got the feeling that they were unsure about many of their decisions, but took the risk to see where it would take them.  Good job!

Other tidbits:

  • Agrawal said that “Y combinator is awesome”, it’s good for people who don’t know the business side of starting a business.
  • VCs/Angels want to either see you get a certain number of users by a certain time or a particular revenue number by a certain time.  It’s not always about the money, it can be about user growth too.
  • Posterous uses Mixpanel and Rackspace.

From ZURBsoapbox website:

A Bit About Posterous
The concept of Posterous was decidedly simple: email is the gateway for sharing any content online (be it text, photos, or videos). Instead of logging into Facebook or WordPress to post photos, videos or writing your thoughts down you simply email post@posterous.com and Posterous figures out the best format for the content and publishes a blog post for you automatically with the content you emailed.

In the summer of 2008 Sachin Agarwal received $15,000 from YCombinator and launched the first version on TechCrunch shortly after.
Posterous has taken off since then. The service currently has 35M+ pageviews a month from 15M+ unique visitors to the site. They have a consistent traffic growth of 20%-30% every month. They have also raised a $4.4M round from Trinity, Redpoint Ventures as well as one of our upcoming speakers Ron Conway.

Posterous has yet to turn a profit. The revenue idea which Sachin has talked about is a premium plan they can sell to big businesses using the service. Posterous has also been facing tough competition from Tumblr a very similar service.

A Bit About Sachin
Sachin has been named by Inc magazine as 30 under 30. He has worked on designing Final Cut Pro at Apple for 6 years before getting an idea for a service to make it easier to share pictures, videos and stories with others. Since then he has grown Posterous to 35M+ pageviews a month.

Networking is not just for computers

Why Network with People?

People underestimate the power of networking within your workplace and out and about.  At the workplace, people like to work for/with others who they respect and like (note: I used both respect and like, like alone is not enough).  This is the same outside the workplace.  You don’t lose anything by networking (well maybe time), you only gain by expanding your networking.

A Story about Networking

I’ll give you an example of when I unknowingly networked with someone.  This incident sparked a 10+ year mentoring relationship with me as the mentee.  When I first moved up here, I didn’t know very many people.  I had a friend who lived in the east bay.  One day she invited me over to her mom’s for a family BBQ.  I met her cousins and her mom’s cousins.  I mostly spoke with my friend’s mom’s cousin’s wife (did you get all of that?).

After the BBQ, I went home, thought nothing of it.  Two weeks later, I ran into my friend’s mom’s cousin (the husband) at a local restaurant.  Apparently, the family lived in the same city as I did.  We recognized each other and exchanged business cards.  I saw that he worked in tech, so I asked if we could meet up so I can learn more about what he does at “ABC Co”.  He was happy to meet and talk about his career.

Today, I still meet with this person.   He has since worked with many companies, been acquired, and continues to work on great technology.  I find it so invaluable to hear his war stories of being an executive at all of these tech companies.

After that networking incident 10 years ago, I became a firm believer in (purposely) networking.  You should too!

Tips for Networking

  • don’t know where to find events to attend, find events via Eventbrite and Meetups
  • you can network at any event, don’t assume that networking is off limits at any event, if you don’t know everyone, it’s your chance to network
  • go with a goal, is it to meet as many people as possible?  to meet new friends?  to find some job leads?
  • figure out your 1-2 line answer to “what do you do?”, everyone always asks, so might as well prepare
    • bonus: try different (truthful) answers to see which answer peaks the most interest with folks
  • for several reasons, invite a friend to go with you to an event:
    • you can meet people together
    • you can split up and meet more people by introducing one another to new people
    • worse case if event is a thud, you can hang out with your friend
  • can’t find people to talk with, it’s as simple as saying “hi” when you walk up to a group
  • listen more than talk, learn from others, be genuine
  • it’s ok to cut the conversation short so that you can meet other people
  • give out business cards and be sure to get business cards from others
  • smile! smile! smile!
  • limit the eating and drinking because it’s hard to talk, for sure limit the drinking, slurring and spitting while talking is not likeable
  • a firm handshake says a lot, a wimpy handshake does also
  • if you’re not up to the latest news, before you go, read a couple of articles on CNN.com, you can participate in the current event discussions or be the one in the know about “XYZ”
  • maximize your nametag signage, put your twitter handle and blog URL on there
  • being fashionably early is IN, less people means less noise to chat it up, as people trickle in, they will want to join a group which hopefully you are already apart of
  • welcome new people into your chatty group and introduce yourself
  • no snubbing! treat everyone as you would want to be treated, you never know if your newly found contact has more in common with you than you think
  • if you can’t get yourself out of a group, say that you need to go to the bathroom, some people are good are breaking away, some aren’t, use the bathroom excuse
  • if you know there’s a panel or speaker ahead of time, prepare 1-2 questions to ask during Q&A or 1-on-1 after the talk is done
    • if you ask during Q&A, others may like your question and come up to you to say so, might as well let others do the networking work for you :)
  • after meeting someone, jot down some notes on the back of his business card to help you remember the conversation
  • that night or the day after, send a “nice to meet you” note, some will respond back, some won’t (it’s their loss!)

Alright, all of my secrets are out.  Get out there and network!!!

90+ pitches at SF AT&T Park

Through one of my SF New Tech emails, I found out about Pitch San Francisco ’11.  I snagged a ticket and checked it out out of pure curiosity and because it was at AT&T Park.  Who doesn’t love the Giants?  Dodger fans, please do not respond.

When I first got there, I was overwhelmed with all the startup pedestals, over 90 in attendance.

Here are the ones that I visited and my two cents:

  • JustShareIt – peer-to-peer vehicle / motorcycle rental website, like a GetAround competitor (who recently closed a round of funding), I heard that they do not have insurance in the mix which is a bad business decision, it’s an accident waiting to happen (no pun intended).
  • BackBlaze – Mozi backup competitor but charges by the month ($5/mth) for unlimited data backup, Mozi charges by the GB now, I asked the founder why I hadn’t heard of them, he told me they do zero advertising and rely on word of mouth, I should have asked how many TB of data they back up.
  • HeyStaks – community-based internet search, you can pick an interest community to be apart of, then when you do searches, then it shows the popular search results of that community for the same keywords, not sure if this is good or not, you need a lot of people in a community doing a lot of searches for it to be a really good search, I also wonder if people want to share their search results, today Google gives you different results for different people, how does that gets normalized w/ HayStaks usage?
  • TauMobility – has many products but showcased telemedical diagnosis system, basically a doctor in another location can see a patient and see her medical data (e.g., blood pressure, heart rate, etc), they have medical devices that collect the data and upload it to servers to be shared instantly (real-time?) with doctors, I learned that the medical devices like a stethoscope with a USB connection needs to have FDA approval because it’s medical-related, they are trying to get into hospitals, so far one in New Jersey and maybe another one.  I heard getting the medical industry to go electronic all the way is hard.
  • MomoLocal – I didn’t get a chance to talk to these guys, but from afar, it reminded by of Zaarly, they tout themselves as a “community marketplace for anything by anyone”, I’m a bit Zaarly-biased because I met some of the guys at Where 2.0 conference.
  • Schwinkers – drinking made social, if you’re lonely and need a drinking buddy, use it to find drinking partners, they are doing a big push in the Mission District in SF, so if you live there, check it out.  I was drawn to the pedestal because I liked the big mustache logo and wooden background, I am very scientific.  It would be interesting to see a Groupon-like approach to buying drinks incorporated into the service.
  • Short Enuf – temporary URL shortening service, think Bit.ly but with a time limit, the founder told me that you can share long URLs easily using the service especially on a mobile device where you don’t want to type in the whole URL.  If there is real value in this, I don’t see why Bit.ly wouldn’t just add time limits.

Unfortunately, I couldn’t get to all the pedestals.  There were some pedestals that had a lot of people, HipMunk being one of them.  It would have been great I was surprised that there wasn’t a lot of schwag being given out.  I got a bunch stickers though.  :)

You can find out more at the official event website.

How Google makes GMail mobile fast

When I saw the title of the Meetup talk, “High Performance Mobile” and that it was in the south bay, I was sold in an instant.  Who doesn’t want to know how to make their mobile web apps go faster?  The SF Web Performance Meetup talk took place at LinkedIn who graciously provided space, drinks (non-alky), some appetizers, and a foldable water bottle with LinkedIn on it.  Not too shabby.

The speaker, Steve Souders, is a Head Performance Engineer at Google and previously worked at Yahoo! as Chief Performance Yahoo!.  He’s written a couple of O’Reilly books and created many performance tools.  You can tell that he is very passionate about web performance.  In fact, you would think that he was talking about kids because of how excited he was talking about performance.

Let’s get started about the talk take aways.

Why web performance is important?  If your web application is slow, this can cost you money.  Fred Wilson from Union Square Ventures said about successful web apps, “Speed is the most important feature.”  NetFlix turned on gzip and saved about half of their outbound traffic.  Just about all smart phone ads talk about fast this, fast that.  These companies know what sells phones.

Mobile in general is exciting because there is so much more growth to be had.  If you compare the same relative point in time of when mobile web browsers were introduced versus desktop web browsers were introduced, mobile web is almost 5 times the number of desktop browsers.  In 2010, 2.6% of eCommerce purchases were made via mobile.

Souders says web performance optimization will drive traffic, improve user experience, increase revenues, and cut costs.  A lot of the tips that he covered are applicable to desktop web also.

Of the many tips that he talked about, here are the top important 3:

  1. Make fewer http requests
    • Combine files into fewer files, use sprites, inline images, canvas, and SVG
  2. Reduce DNS lookups
    • The number of DNS lookups is equal to the number of unique hostnames in the web page.  Reducing the number of unique hostnames reduces the number of DNS lookups.
  3. Avoid redirects
    • Shouldn’t have different URLs for different clients (desktop, mobile, tablet), should be same URL for all, “it’s a mistake to have different best practices for mobile and desktop”

It seemed that java script is a thorn in Souders’ side when it comes to performance.  He recommends that java script be put at the bottom of the HTML page. When java script is downloading, rendering of the page is blocked (aka stopped).  This is a bad user experience especially if java script is not helping paint the picture of the web page.

For GMail mobile, in the background, they download the java script, but wrap it in comment tags.  This is so the file gets downloaded without affecting the rendering of the web page.  When they want to execute java script, they get the script DOM text elements and remove the comment tags and use eval().  In a way, they are prefetching java script that may not be needed, but have a way to execute the java script if needed.  Genius!

Another cool thing that companies are doing is writing java script and CSS blocks to HTML5 localstorage.  Bing and Google both do this for their search pages.  When you download a webpage on your mobile browser, they will set key/value pairs of unique IDs pointing to java script and CSS.  So the next time, you visit their sites, they don’t need to download this information again.  Souders did a quick demo where he sniffed the packets and dumped the info being downloaded in the first website visit and in the second.  He showed us that indeed there were unique IDs pointing to blocks of java script and CSS in the first trip then less data transmitted on the second trip.  The only problem with localstorage though is that you don’t have a way to see how much storage is left/available.  All you can do is keep saving until it throws an error.

More tidbits:

  • Check out Steve’s blog at SteveSouders.com, you will find the slides of his talk there along with tons of information about web performance.
  • Use “DSUG” discount code for 40%-50% off of O’Reilly books – it’s for awesome SF Web Performance Meetup members!
  • Blaze.io will show you waterfall performance of your mobile website
  • Httparchive.com will show you the average download sizes for desktop web and mobile web – website download size is 490k, mobile is 311k
  • Most people close SSL connections which is bad because it takes so long to set those up
  • Performance and parameters for tablet browsers are more like smartphone browsers, visually create like to desktop but aim for perf like smart phones
  • Browsers caching are too small and purging algorithms are poor

Last, but not least, Souders was very adamant about mobile applications being open.  Maybe it’s the Google in him hahahaha.  He said that he wouldn’t look into improving performance of native mobile apps as part of his research.  Too bad for me since I am an iOS developer, but maybe I should consider HTML5?  Hmm…

I really enjoyed this Meetup because there were some invaluable discussions going on.  Until we meet again!

The bible of business model generation

I have a friend who’s writing a book on online film distribution.  Every once in awhile we chat about startup topics.  As a thank you to me for giving her awesome advice, she sent me a surprise book in the mail, “Business Model Generation” by Alexander Osterwalder and Yes Pigneur.  I didn’t think too much of it, but I felt obligated to read the book in its entirety because it was a gift after all.  Within the first few pages, I was hooked.  This book is like a bible for evaluating or coming up with a business model.  If you do a quick google search on “business model generation canvas”, you will find many websites citing this very book.  It’s that good.

So let’s pretend for a second that you don’t want to buy or read the book, I think that I can help.

For those who don’t want to buy, but want to read some of it.  Go to the Business Model Generation website for the first 72 pages of the book for FREE!!!  This will teach you the basics of the business model generation canvas.

For those of you who are thirsty for some quick startup knowledge without doing all the reading, I can do a brief 101.  First and foremost, the business model generation canvas is the basis of what you need to know.  There are 9 building blocks of the business model canvas – value proposition, customer relationships, channels, customer segments, revenue, costs, key partners, key activities, and key resources.  All of these are interrelated.

When you are thinking about the building blocks for your business model, think about these questions:

  • Value proposition: What value do we deliver to the customer?
  • Customer segment: Who are the most important customers?
  • Customer relationship: What type of relationship does each customer segment expect us to maintain with them?
  • Channels: Through which channels do our customer segments want to be reached?
  • Cost: What are the most important costs that is key to our business model?
  • Revenue: What are customers willing to pay?
  • Key Partners: Who are our key partners/suppliers?
  • Key Activities: What key activities does our value proposition require?
  • Key Resources: What key resources does our value proposition require?

There are many techniques to design a business model.  My favorite design techniques in the book are doing customer insights and prototyping exercises.

For customer insight, there is something called an Empathy Map where you identify a customer segment and do a profiling exercise.  Ask the following questions to get a better understanding of your customer’s point of view:

  • What does she think and feel? – what really counts, major preoccupations, worries & aspirations
  • What does she see? – environment, friends, what market offers
  • What does she hear? – what friends say, what boss says, what influencers say
  • What does she say and do? – attitude in public, appearance, behavior, towards others
  • What are her pains? – fears, frustrations, obstacles
  • What are her gains? – wants/needs, measures of success

For prototyping, as the word entails, you come up with as many business models as possible no matter how ridiculous it sounds.  A tip is to start with a different building block for different ideas.  Then you discuss all the possible business models to get to the one that you like.

Lastly, the book touches upon business model strategy where you should consider outside forces that could impact your business model – key trends, market forces, industry forces, and macro-economic forces.

You should read Steve Blank’s blog about teaching Lean LaunchPad to Stanford students.  He uses the “Business Model Generation” book for the 8-week class.  It’s fun to read the students pivoting their business model along the way, much like a real startup!

If you have an itch to learn more about the book, do a google search and you will find many articles written about it.  Happy readings!

How 99Designs.com came to be

I love hearing stories of entrepreneurs, it keeps me motivated and there are always great lessons to be learned.  Today, I went to an event in the city of Campbell to hear Matt Mickiewicz, Founder of SitePoint, Flippa, and 99Designs, talk about how he got started.  At first glance, Mickiewicz is a very happy-g0-lucky type of guy, but don’t be fooled because he is a serious entrepreneur.

Back in late 1990s, there wasn’t a lot of of information on how to build websites, so Mickiewicz decided to pull all that information together on one website called WebmasterResources.com.  Hahaha, I laugh because later in his talk he mentions another website with a long name.  Alright back to the talk.  He coded WR using MS FrontPage which he jokingly said he pirated.  Did I mention that he was only 15 years old when WebmasterResources.com was started?  During lunch at school, he would have sales calls with customers and say that he had a hard stop at 1pm.  Unfortunately his customers didn’t know that his hard stop was really his social studies class.

Later, Michiewicz partnered up with someone much older (not 15) who had the business know-how to take WebmasterResources to the next level.  WebmasterResources then got rebranded to be SitePoint.  SP had a lot of tutorials that were downloaded a lot.  All of them for free.  He figured out quickly that there was a demand for printed tutorials.  For $35, people can get a printed copy of a tutorial so that they can use while creating a website.  He said they found some sh*ty online print on demand service who could take credit cards and went from there.  Today, SitePoint gets 2.5M visitors per month and has 1.5M email subscribers.  They were able to outgrow a competitor who had $3M in funding when SitePoint only had $300K in funding.

It is often asked how entrepreneurs come up with their ideas and then how do they validate and build the business.  For Mickiewicz, he was keen on monitoring the conversations on the vBulletin forum on WR.  Organically, graphic design competitions were happening with no money involved.  Then people started offering money to have directed contests.  Mickiewicz saw this and decided to build a MVP product within SitePoint.  He also implemented a $10-$20 listing fee for the contests.  Soon people from coffeeshops and non-tech businesses were finding their way to his SitePoint site and posting design contests.  The design contests were buried in the forums so Mickiewicz knew that he was onto something.  Later, 99Designs was spun off and the rest is history.

Another website, Flippa, is a website auction site which started in the forums on SP too.  To this day they have auctioned off $55m worth of websites with 55% of website sales ending above it’s initial sales price.  A notable site is FaceSmash which sold for $30k the week the movie Social Network came out.  Even Perez Hilton blogged about Flippa because of its relationship to FaceSmash and Social Network.

One idea that never took off was NameMyThingey.com where you can crowdsource business names.  People would get 50-100 name recommendations and be indecisive and not choose a name after all.  The name brainstormers got pissed because of this.  Oh well, you can’t win it all.

I really enjoyed hearing Matt Mickiewicz talk about all of his business ideas.  I had no idea that 99Designs was just one of many companies that he started.  I wish him luck with Flippa and a new eLearning video website that he’s working on.

Tips from Matt Mickiewicz:

  • To keep costs low try swapping services for other services. He would trade ad space on WebmasterResources for free hosting services.
  • If you are deciding to get an MBA, maybe try finding someone really smart in the Valley and volunteer to work for them for 2 years.  I guess this makes sense.  If you are going to forgo salary for 2 years why not do an apprenticeship.
  • Track your competitors, look for their sales process, what’s going on on their front page, and their conversion rates.  Since 99Designs has started, a bunch of other graphic design contest websites have popped up.  He said CrowdSpring actually did a contest on 99Designs for its logo.  Funny!
  • Pick up a book on sales and negotiating
  • Don’ts: 1) Don’t hide from customers, his personal cell phone was on SP website 2) Don’t trust  vendors and prepay for things.  Some vendors go bankrupt.
  • Consider using Amazon EC2, 99Designs uses it, they get 5.25TB of images uploaded frequently, EC2 helped them scale with customer demand
  • Initial team members of founding team should be 4-5 people – 2 developers, 1 designer, 1 product manager, and maybe 1 marketing person.  This is probably one of the first times that I’ve heard product manager and marketing person at the very beginning.  I agree.
  • If there isn’t positive feedback early even when it’s a less than perfect product, then you should abandon it.  He said loyal customers will stick it through and give you feedback to make it better.
  • It’s possible to outgrow other competitors who have a lot more funding than you.  The main difference is that they were able to leverage their distribution channel.  He mentioned that an idea is worth nothing and often times fails because lack of distribution channel.
  • Consider partnering up with forums and pay forums who send customers your way.  He told me that one dating website had over millions of users and he asked them how they did it.  The dating website basically partnered up with forums overseas and acquired customers that way.  Since this was in other countries, their customer acquisition costs were much cheaper than the US.  After establishing a foreign user base, the the dating website came to the US.  I have never thought about launching in other countries especially since it’s cheaper to acquire customers.  I’m going to have to try this one day.
  • You can get more sign-ups using viral techniques.  The dating website mentioned above leveraged user’s imported email contacts to get more sign-ups, for every 100 email contacts imported, they got 10 new users (10% conversion rate).  I think this method has worked well for Facebook.  I know that I went through my gmail contact list to see who I can “friend” on FB.
  • If a product is not part of your core business, consider spinning it off / rebranding it.  This is interesting because I personally wonder why Amazon keeps Mechanical Turk and EC2 under the Amazon brand.

ZURB.com’s blurb on Matt Mickiewicz:

It’s not often that you hear of a 15 year old who was closing $10,000 advertising deals for his newly launched site in between classes at school, earning enough to buy himself a new BMW with cash by the time he was just 16.

That’s the story of Matt Mickiewicz the founder of Sitepoint, a site which, back in 1999, was the first online forum for web designers and developers. It has matured to be a massive web community and tutorial/resource archive for web developers and designers now. Matt has spun off three other businesses based on observing how his 1+ million users use Sitepoint.