Web or iPhone OS applications to make money?
If you are a developer who’s interested in starting a new business or even just earning extra cash on the side, you have a few options that can lead to scalable profits and passive income. The most popular choices these days are SaaS (Software as a Service) and iPhone/iPad development.
Choosing web application or iPhone OS development is a matter of personal taste, skills, goals, technical requirements, and so on. If we are looking at things solely from an economical perspective though, it’s interesting to consider for a moment which of the two is most likely to be profitable all things being equal.
In my opinion, despite the horror stories, it is far easier to make money with iPhone/iPad development than with charging for a service provided by a web application. The reason for this is very simple. Users don’t expect to pay for websites. They occasionally do for the useful ones, but it’s a relatively new approach and people are still adjusting to it.
Due to the hosted nature of SaaS offerings, they often require a monthly or yearly subscription as well, which is harder to sell than a single one time purchase. $9.99 here, $19.99 there, all adds up very quickly to an uncomfortable monthly bill.
iPhone and iPad applications on the other hand have a major advantage. Apple created an incredible ecosystem where millions of users are ready to pay for tiny applications that solve one small problem or are amusing enough to install. Low prices without the need for a subscription encourage impulse buyers to purchase applications without giving it a second thought.
You’ve probably been on the web for many years now, yet how many web applications do you pay for? However if you have an iPod Touch, an iPhone, or an iPad, how many applications have you bought? I own an iPod Touch and rarely use it, yet even I’ve paid for some applications.
It’s a matter of expectations and Apple did a marvelous job in that respect. When you buy an iPhone, you are almost expected to get cool apps for it. That, along with web access, is the whole point of having an advanced smart phone device. There are no such expectations for web applications.
Take a look at this list of applications and their sales. Most of them could be easily ported to the web, yet their limited scope and functionality wouldn’t even justify calling the resulting sites web applications. Few people would pay for them, even if one were to price them at $0.99. (And I’m not talking about apps for which being on a phone is the key feature). Conversely, porting a free Flash game from the web to the iPhone, for example, would almost certainly lead to sales.
Android is an option too, but I feel that Google has done a much poorer job at setting expectations. Furthermore their marketplace is a lackluster version of the App Store, users from several countries are unable to purchase applications or have to jump through hoops to do so, and developers from countries such as Canada, cannot publish and sell their apps on the Android Market.
The question is, will Google do a better job with the Chrome Web Store that was announced yesterday at Google I/O? If so, it may become a good extra channel through which to sell web applications; an App Store for the web if you will. The distinction between web apps and offline mobile apps may even fade away at some point. That would be a great thing for developers. For the time being however, it is my opinion that developing for the iPhone OS is a safer bet in terms of achieving profitability.
A tale of two search engines
Remember when Altavista seemed good enough? Then along came Google and seemingly overnight everything changed. We didn’t even know that it was possible to receive such good link suggestions from a search engine. Yet there, right before our very eyes, it happened.
These days, highly popular search engines are worth billions of dollars, mainly thanks to the massive advertisement businesses that can be built on top of them. The incentive to get a slice of that huge pie is clearly there. But can we do better than Google? And will such innovation necessarily arrive from the research labs of giants like Apple or Microsoft?
The answer to the first question is obviously yes. There is always room for improvement. The latter question may appear equally obvious as well, but let’s take the tale of two different search engines into consideration.
One of them was started by xooglers (ex-Google employees) with plenty of experience in the field of search engines; it had a team dedicated to its development and could afford to have a VP of communications. They received plenty of funding ($33M) to get the ball rolling, and garnered a fair bit of press coverage when they first launched.
A very different search engine, however, was started by just one person. It was bootstrapped (no external investors), came wrapped in a silly name, and virtually no one paid attention to its launch.
The first is Cuil (pronounced ‘cool’), which as many know, has become something of a running joke online. It’s the perfect example of how not to create a startup and of everything that could possibly go wrong with an ambitious software project.
From day one the results were so incomplete and irrelevant, that one has to wonder if the $33M they received was spent on developing the technology needed to clone Samuel Becket and place him in charge as the chief architect of the project. The absurdity of Cuil’s search results even led to the development of a highly entertaining Cuil Theory.
A few days ago the Cuil team launched an automated Wikipedia of sort, called cpedia. The end results were so terrible, that they will serve as an eternal cautionary tale against the indiscriminate use of Markov chains.
Unless Cuil/Cpedia is a practical joke aimed at the tech community, they may as well shut them both down. At this point they really are just wasting their time (and ours).
The second search engine, the one with a rather wacky name, was created by a single person (Gabriel Weinberg) and is called Duck Duck Go (a play on the name of that old childhood favorite, ‘Duck, duck, goose’). However, much to the surprise of many, there is real innovation going on here (particularly presentation wise).
Duck Duck Go’s zero click information is very useful – as is dividing the results by topic (for example, the word “ruby” can have different meanings in different contexts). Presenting all the search results on a single page (via AJAX) was a smart and handy feature as well. With this search engine your privacy is respected, particularly since your IP is not even logged.
This site is still as niche as it gets, but it’s reaching a tipping point amongst the ultra-geeks — not to mention that more and more people (myself included) are adding Duck Duck Go as their default search engine within their browsers. Is it better than Google? No, not always. It depends on the type of query. Sometimes it’s better, sometimes it’s worse, but it’s usually quite usable and is a concrete attempt to innovate the search engine realm.
Duck Duck Go serves as a poignant reminder to the software world that David can still strike Goliath.
Startup for sale on eBay (and it’s a great deal)
One of the best programmers I know is selling a web application on eBay, that he’s been developing and running for the past three years. Given the starting price and considering what one lucky person or company will walk away with, I must say, it’s an amazing deal. I’m writing about his auction here so that I can help it get the proper exposure it deserves and because I think it’s an incredible bargain for anyone who is interested!
BlogBabel, the aforementioned site/web app, is a blog indexing and aggregation service that began in 2006. Amongst its features are the ability to detect and show the most popular blog discussions, weekly posts, books, videos, and even popular blog entries based on their location (through geotagging). It also features leaderboards of the most popular blogs.
Its codebase uses Python and Django, and consists of 27,359 physical lines of code (roughly equivalent to 6.46 person-years, according to sloccount). The R&D alone makes this application worthwhile to an interested party.
At this stage, BlogBabel has an Italian interface (located at it.blogbabel.com) and aggregates almost 15,000 Italian blogs and 5 million posts. Changing the interface to make it an international project that’s available in several languages, or switching to English (solely), would not be challenging in the least (they used to run a Spanish version as well, for example, but decided to discontinue it so as to focus on the Italian one).
BlogBabel has been featured in the mainstream Italian media and has had a noticeable influence on the Italian blogosphere. One could argue that it has been the yellow pages of the Italian blogosphere. Because of this, Ludovico Magnocavallo (the site’s creator) received substantial offers to buy BlogBabel in the past, but he turned them down because he wanted to continue building this site. Now however, due to personal circumstances and lack of time/resources, he’s willing to sell this application for what may amount to far less than its true value. And here’s the real bargain, the starting price, without a reserve, is 4,999 Euros. This is of course, a ridiculously low price for the value being offered. But Ludovico believes in letting the market decide.
If I had the funds lying around, I would buy it myself and gear it towards the English speaking world (in conjunction with the pre-existing Italian version). It’s a prepackaged, virtually ready-made startup with a great deal of potential both in its current state and in terms of what it could grow to become.
To recap, the auction includes:
- The domain name blogbabel.com (it.blogbabel.com has a pagerank of 6);
- The full codebase (almost 30,000 lines of code);
- A database containing 3 years worth of data relating to the Italian blogosphere (more than 30 GB, lots of data-mining opportunities);
- 4 hours of work to help you with setting up the site on your own servers.
BlogBabel has been running smoothly for three years, and is currently under-marketed. Optimizing ads, affiliates, and similar sources of revenue wouldn’t be hard at all, especially if one were to aim this site at the English speaking world.
Also, Ludovico has already implemented most of the code that’s necessary to allow users to have accounts (through OpenID), but since these “social features” are not fully implemented yet, they have not been deployed in production. A buyer could decide to disregard them or finish implementing them and roll out a technorati-like service. The winner of this auction could decide to implement support for Twitter, comments on social networks, sentiment analysis, etc, on their own. The possibilities are really limitless when you start with a solid engine and crawler, and already have a great deal of data at your fingertips.
I know Ludovico and he’s a stand-up guy. If you are interested in this great deal, you can bid here. If you have technical questions about this auction, please feel free to contact him directly through eBay.
UPDATE (September 8, 2009): Ludovico received an undisclosed offer for the site and a few years of maintenance work, so the auction for the site alone was suspended.
In defense of ad-based business models
In the past I have been a strong advocate of web business models a la 37Signals, where you get to charge your users for a product or service that is provided. I still believe deeply in the viability of such an approach when it comes to making money online (in fact ThinkCode.TV will essentially do just this) – after all it’s the Internet equivalent of what we’ve been doing for thousands of years offline.
Recently however I’ve been reflecting on the ad-based alternatives that I’ve tended to dislike in the past, as a sentence in John Gruber’s recent article really stroke a cord with me:
Undeniably, there is money to be made in digital publishing with free reader access, but whether that revenue leads to profits depends upon the scale and scope of the organization. The potential revenue does not appear to be of the magnitude that will support the massive operations of existing news organizations. What works in today’s web landscape are lean and mean organizations with little or no management bureaucracy — operations where nearly every employee is working on producing actual content.
He is right. Ad-based models are generally not going to make huge amounts of money and therefore be able to satisfy your grandiose dreams of wealth. You’ll have to keep your team “lean and mean”, and cut down on expenses as much as you can. This is true for any business, but there is little margin for spending extravaganzas in this particular arena.
So long as you are not kidding yourself into believing that you’ll make it big, free sites that sustain themselves through sponsors, ads, and reputable affiliate programs like Amazon, are still an option that’s worth keeping on the table. And this business model doesn’t have to be exclusive, it could easily be mixed with others, like some bloggers/writers do when they promote an e-book they’re selling to their audience.
Last year, without trying to become a new media “conglomerate”, I saw several sites of mine generate a bit of revenue on the side. I ran these sites entirely as a hobby. Yet, come tax time, I figured that last year I made $4000+ from these sites, which happen to be three or four relatively unknown blogs, that get updated sporadically whenever I have the time.
These are small, somewhat uncultivated online “properties” that are fairly under-optimized. I know I’m leaving money on the table. What would happen if I were to have a more business-minded approach in terms of managing them? For example, I could optimize them for SEO/SEM, strategically position and A/B test ads, actively pursue new sponsors, post on a regular basis every other day, invite external writers or pay for some highly sought types of articles, and so on.
My guess is that I wouldn’t get rich even if I took these steps, but I could generate a fair amount of extra income every month. I’ll confess that this idea is tempting me, not just for the extra money, but also for the hidden benefit of having several distinct audiences that I could reach. Not to mention, the thrill of watching those online “properties” of mine, and any new ones that come along, slowly grow and become more useful to my readers. Pulling this off would require hard work in my limited spare time, but it could be done.
DHH recommends building a “small Italian restaurant on the web”. And I agree, but I’m starting to believe that building a “small publishing company” of one’s own on the web is a valid alternative.
Announcing ThinkCode.TV’s new English newsletter
Ten days ago I mentioned ThinkCode.TV, my startup on the side, the aim of which will be to produce high quality screencasts about programming, both in English and Italian. My two co-founders and I are relatively well known in Italy, so I was expecting the announcement to generate some buzz in my home country. What surprised me though was finding out that my informal pre-announcement generated quite a bit of interest in the English-speaking world as well.
In fact, over the past few days I have been contacted by several people who were curious about ThinkCode, some of whom asked me to send them an email when we release English content. Meanwhile, we found our second native English speaker (who’s a very solid programmer) who agreed to work with us to narrate and create original English videos.
It’s clear that things are moving fast and we realized that the presence of two distinct product lines, one in English and one in Italian, generally appeals to two different audiences. As such having a single (Italian) newsletter just won’t cut it. So today, we are pleased to announce our English newsletter, which I invite you to join if you want to stay in the loop. We haven’t decided yet if we are going the “private beta” route or not, but joining today will guarantee you early access if we do.
This way, English speakers can join our English newsletter (where only English content will be announced or discussed), and Italians on the other hand can continue to join our Italian newsletter (in which both Italian and English content will be announced in Italian; this to account for the fact that some Italians may be interested in purchasing products that are available in English only).
We’re really excited by positive responses we’ve already received and are really looking forward to providing you with amazing educational material. If you are interested in becoming an author, are a company who would like to strike up a partnership with us so that we can adapt and sell your videos in Italian, or simply would like to get in touch, please drop us a line at info@thinkcode.tv.
Startup Interviews: Zooppa.com
What follows is an interview with Nicholas Wieland, CTO of Italy-based Zooppa, a fast growing social network for creative types. This is the second in a series of interviews I will carry out with interesting figures from the micro-ISV and startup scene. If you have a compelling story to tell, own or run a tech startup, and would like to be featured, please drop me a line via email.
1. I’d like to start by tracing your background. What did you do prior to Zooppa?
Programming, programming, programming. I started out working for Neato Europe as their “one-man-band programmer”, building their e-commerce site and taking care of their infrastructure (nothing more than a bunch of servers). In those days my love of FreeBSD, PostgreSQL and dynamic languages started to grow exponentially. As the only employee I had to find a way to produce quantity and quality at the same time, and the technologies above were a perfect fit for the job.
After leaving Neato I did consulting work for a few years, for customers like Monte dei Paschi di Siena and Italian Telecom. Albeit those are big names, it was with the smaller scale customers that I enjoyed working the most. I won’t mention them by name though as they don’t impress people as much as big banks. 
I used to work primarily with Python, while developing a growing interest in Ruby, which blossomed when Ruby on Rails was released.
In the meantime I was helping Marco Ceresa writing the first book in Italian about Ruby (thus cheating on Python officially for the first time) and working part-time for Assembla on their Hotchalk project.
2. What led to the creation of Zooppa and how did you become its CTO?
Zooppa came from an idea that Davide Lombardi, an Italian journalist, had to found a company with the help of Riccardo Donadon and his firm, H-Farm, an early stage startup incubator. I joined Zooppa almost by accident, having answered a job posting thinking that it was some kind of consulting position for RoR from a forward-thinking employer. I soon found myself talking with Riccardo and Peter Caiazzi (of Netscape fame) at a wonderful countryside farm, full of fellow geeks. I was immediately sold.
I was first hired as a consultant and a few months later become the CTO. I guess the reason is that I’m a good programmer. You should ask Riccardo.
3. Can you explain to our readers who may not familiar with it, what Zooppa is? (Think an elevator pitch.)
Zooppa is a web application for designers and other creative types. It’s based on a new approach to online advertising and on a value proposition that goes beyond the simple “click” formula. We give our users a brand that is looking for a commercial, they create ads through a competition (videos, print ads, radio commercials, banners or simply concepts), and these ads are voted on by the site’s community. Eventually the ad makers win money (I think we’ve awarded $400,000 to date) based on the popular vote and the choice of the customer who commissioned the project.
In my opinion it’s a wonderful way for people to show what they’re able to accomplish for companies like Google, Nike, TomTom and many others. And based on the number of people from our community who have been hired by these companies, it is clear that the companies agree as well.
4. What kind of funding did the company receive?
No funding other than that of H-Farm. I strongly believe that you need to have a product before you ask for funding. I’m absolutely against the “promise-based” economy we all know. We’re going to be looking for our first round of substantial funding very soon, as we’re now able to show our polished product and our large community (something we couldn’t do one year ago). We have been able to give Zooppa its own character and goals, and we proved that it worked. Now we are able to make promises that we can stand behind.
5. How are things going? At this stage have you been able to be profitable, and can you disclose a few statistics about Zooppa? How many employees, users, pageviews and so on?
No, we haven’t been profitable, but we’re getting very close. We are somewhat akin to a combination of YouTube, Flickr and Facebook (in the sense that we serve videos, images and have a timeline), and we had huge startup costs, so it was basically impossible to be profitable initially, which we knew from the get-go.
We have 40,000 users more or less, 12,000 print ads, 2,000 videos and so on. It’s quite impressive when you consider that these videos are the result of a creative process and not, say, simply the recording of your cat a la YouTube. In terms of employees, we’ve got about 20 people.
6. It seems to me that the idea is innovative, the videos are fun, and there is a solid business model behind it. Why do you think the company has received little attention outside of Europe, especially by specialized blogs that cover all kinds of startups? Can you tell us about your struggle to get exposure?
Oh well, you’re opening a can of worms with that question… We made a huge mistake at the beginning: we focused on our own market without “attacking” the US one. Other than that, we didn’t receive any coverage outside of Italy, even if I did all I could to reach out to the biggest blogs that cover startups. It seems to me that you only get coverage if you are burning VC money or in some way are doing something that’s fashionable at the moment (such as with Twitter right now).
I’ve even seen one of our clones getting more coverage than us, which is kind of ridiculous as that competitor implemented the idea horribly in my opinion. I would say that the originality of the idea doesn’t really matter to such bloggers, just the funding and related issues (not to mention the various possible conflicts of interest…). Honestly this is very hard to swallow.
7. How did choosing Ruby on Rails impact the project?
We are incredibly productive. We normally code a prototype and write specs before putting it online. This is awesome, I can turn ideas into code in no time, test and refactor them later if I realize that performances are not as I would like them to be.
I strongly believe we wouldn’t survive without Rails. I still remember the presentation I gave to RailsToItaly, I just had done a complete redesign and rewrite of the site in 38 days. My presentation’s title was “Productivity with RubyOnRails or how I stopped worrying and learned to love Zooppa”. I think this title speaks for itself.
On a side note, I would also like to say that as an old school web developer and early “Railer” (you can find my posts whining about DB serials stretching as far back as 2004 with answers from DHH himself ). I think we have the best provider ever. I work with EngineYard and their service is terrific. I have no idea how they can offer the sort of support they do and still keep prices so reasonable. Never in 10 years on the web have I experienced the type of service I get from EngineYard. They are one of our most precious assets.
8. As CTO for the company, what are your main duties?
I code like crazy, as I already mentioned, and I take care of our architecture and its evolution. I’m in charge of other developers (http://twitter.com/oscardelben/, http://twitter.com/michelegera and http://twitter.com/smash) and provide them with specs to implement. And I whine about everything. Whining is the defining skill of every CTO, trust me. 
9. Where is Zooppa heading and what plans do you have to bring it to the next level?
I want to integrate Zooppa with the major video and image platforms. And with Twitter of course. I would also like to experiment with Sinatra for a Facebook application. As well I’m coding my own blog/static site solution with Sinatra and Metal (I really dislike WordPress). And I do so in my free time, which means BSD license all the way. I also plan to use CouchDB for our timeline.
We have a lot of stuff going, and we’re going to hire more employees, so feel free to send your CV to nwieland@zooppa.com, and be sure to include Erlang and Haskell if you are brave (I received complaints about my choice of technology, because it’s hard to find Ruby developers around here. If I start requiring Erlang and Haskell skills I will definitely establish a record number of complaints here in H-Farm). It’s going to be a lot of fun, really.
I really want to thank Nicholas for his time, and I invite my readers to stay tuned for more interviews. An Italian translation of this interview is available on Stacktrace.it.
Ruby 1.9 screencasts plus an announcement
Previously I mentioned the importance of migrating away from Ruby 1.8, in favor of 1.9. Before my business trip to Italy, I had a chance to watch David A. Black’s new videos for Envycast, in which he presents the essential concepts required to migrate from Ruby 1.8 to 1.9. This pair of videos totals roughly an hour and a quarter, and can be purchased in a package deal for $16. You probably won’t find them to be as entertaining as the ones filled with gags by Gregg Pollack and Jason Seifer, but in my opinion these videos are well thought out and highly informative. The price is fair if you consider that they can bring you up to speed with Ruby 1.9 in no time at all and with very little effort on your part.
Speaking of screencasts, in Italy I had a chance to pre-announce my “startup on the side”. It’s called ThinkCode.TV and will, you guessed it, create and sell high quality screencasts about programming. ThinkCode.TV was founded with a couple of friends of mine who are top notch programmers and teachers respectively in the Python and the XP/Agile world. Initially we’ll focus on the Italian market (the three of us are Italian) by producing screencasts in Italian about Ruby, Python and TDD. But we plan to expand our horizons, by covering more subjects, accepting external authors, and eventually expanding to the international market by migrating our best sellers to English versions, narrated by native English speakers (to save you the hassle of having to hear a foreign accent).
Should things go well, we may expand beyond the Italian and English markets. But for the time being, I invite Italian speakers to join our newsletter (which is in Italian) to learn about the development of this project and be advised of when we release the first videos. When we branch out to the English speaking world, my readers who don’t speak Italian, will be able to learn about it through this blog.
Startup Interviews: Balsamiq Studio LLC
What follows is an interview with Giacomo “Peldi” Guilizzoni, founder of Balsamiq Studio LLC, a fast growing micro-ISV. This is the first of a series of interviews I will carry out with interesting figures from the micro-ISV and startup scene. If you have a compelling story to tell, own or run a tech startup, and would like to be featured, please drop me a line via email.
1. Before starting Balsamiq you were working in the States. Could you please tell me more about your background?
First of all let me thank you Antonio for wanting to write about my little company. I aim for my products to reach ZenWare status, so being interviewed by a Zen-meister like yourself is truly an honor.
I started programming when I was 12, when my father bought me a “teach yourself BASIC” course on those big floppy disks. I remember getting stuck on the “for loops” section for a while, but the damage was done, I was hooked. I programmed all through high-school building software which my father gave out as part of his job (accounting stuff, written in Pascal), and then went on to study Computer Science at the University of Bologna, with a one-year exchange program at the University of California in San Diego. A month after graduating I went to San Francisco to look for a job, I always knew I wanted to live there, I wanted to “invent the future”. I was extremely lucky to land a job at Macromedia, which was my dream-company. I worked there as a Quality Assurance engineer for a year, then switched to a development job when we started building Breeze (now Adobe Acrobat Connect Professional), an online meeting application. I worked on that same product for about five years, changing job title almost every year and learning as much as I could in the process.
2. Like most programmers you got an early start and then later in life had the chance to specialize in technologies like Flash, Flex and Adobe Air, that would prove fundamental for your startup. How did you come up with the idea for Balsamiq?
The idea for Mockups came from a need I had personally over the years. As a programmer with a passion for user experience, I have been in many feature design meetings in my career, and was always the one jumping up to sketch things on the whiteboard to facilitate discussion – if I’m not looking at something, I cannot properly think about it, it’s just the way I’m wired up.
Whiteboards or pencil and paper are great because of their low fidelity which encourages discussion, but are also limiting because they are not digital – try resizing a container to make it bigger or collaborate on a design with someone remotely, for instance.
I couldn’t find a tool that would give me the same speed, usability and sketch-quality of the whiteboard but was digital, so I set out to build one.
I was also deeply affected by the new “Web Office” way to work, with our data and software to edit it moving to the cloud. Any big paradigm shift like this brings about lots of new opportunities, so I decided to build a company focused on adding ‘flavor’ to Web Office suites via small, focused, high-quality plugins… Balsamiq Mockups is my first one.
3. Did you quit your day job, move to Italy and start working on Balsamiq?
It was a bit more gradual than that, but that’s essentially what happened. I worked on Mockups during nights and week-ends for a while before quitting, and continued to work for 3.5 months after giving notice. My last day at Adobe was June 15th 2008 and I launched Balsamiq on the 19th.
4. What impact has disclosing sales figures and being very open about your results had on your business?
Although it was not my intention when writing those posts, it brought us a tremendous amount of publicity. I was sharing the good news to reassure existing and potential customers that Balsamiq would stay in business for the duration of their support contract. Little did I know it was going to be such a huge attention-magnet!
As a small and young company, I see extreme transparency as the fastest way to build up trust in the marketplace. Plus there’s no way to hide anything on the Internet these days, so why even try? I love it, you can just be yourself and be open about it, it’s very liberating.
5. Could you disclose some of your current stats? How many people are using your application? What is the sales volume like these days?
Sure. I don’t know for sure how many people are using the application, as many customers bought volume licenses and sometimes site-wide licenses. My site’s stats also show about 1,500 people using the free web demo version every day, which is great.
Here’s the data that I do have: as of today (April 12, 2009) I have sold to 3798 customers for a total of $469,048 in sales. Sales keep growing steadily: the last 7 weeks have all been over $20,000, with a record $35k week for the first week of April. We are averaging around 200 new customers per week right now… all with such a simple little tool, how could this be? Someone pinch me!
6. In my opinion desktop applications are far from dead. What’s your take on this topic?
Tell me about it! When I started Balsamiq I never thought I’d be in the desktop software business… my plan was to only sell Mockups as a plugin to Confluence and other Web Office suites. The desktop version was meant to ease the “what if I want to keep working while I’m offline” complaint about working in the cloud. My beta users had to practically beg me to sell them the Desktop version as a standalone app… and now it accounts for 77% of Balsamiq’s revenue!
I also have to come to appreciate the software+services model that Microsoft has been pushing. By coupling the power of native applications with the awesomeness of saving your data in the cloud you get the best of both worlds… It’s no wonder Apple is going in the same direction with their iWork.com offering and that Google is trying to turn the browser in a desktop app shell. These are interesting times, we’ll see what happens…
In the meantime, I like to play in all fields: I have Mockups for Desktop, Mockups for Confluence, Mockups for JIRA, Mockups for XWiki, soon a Mockups Hosted web-app, I will build “web connectors” for the Desktop app… We shall see…
7. What are the most important recommendations you’d give someone who wanted to start a micro-ISV or startup?
Oh gosh, I don’t know…I still feel like such a rookie, I’m in no position to give advice. I know that I get tremendous value from reading the experiences of others who have been through it before me: here’s my bookshelf; plus I read a ton of blogs and watch videos of conference talks as much as I can.
8. What’s next? And where would you like to take your company in the short, and, long term?
The short term goal is to finish the online version of Mockups, and to deliver the “linking mockups together” feature (our #1 request from customers). Oh, and to answer all the email sitting in my inbox!
The medium and long term goal is to build what DHH would call “a little Italian restaurant on the web”, a small company of 5-6 super-stars who love to work with each other and take pride in delighting our customers day after day.
Balsamiq is getting there a lot faster than I originally expected, but I am enjoying every minute of it so far, the ups and the downs…it’s been a fantastic learning experience already and I am excited for more… onward!
I really want to thank Peldi for his time and kind words, and I invite my readers to stay tuned for more interviews.
Credits: First photo © Matt Snow.
Better Software 2009 and Pycon Italia Tre
In May I will be presenting at two conferences in Italy. The first is called Better Software 2009; it’s dedicated to the world of software development, Agile methodologies, Web 2.0 and a bunch of other buzzword compliant technologies. This conference will be held on May 6 and 7 in sunny Florence. If you speak Italian and happen to be in Europe, you can register here. Italian conferences tend to be fairly cheap, so you’ll be able to attend one day for 160 Euros or both days for 280 Euros. The price is even lower if you are a student or your company is purchasing multiple tickets. Also the first ten readers who register with the following coupon 3DNMFKNM will receive a 10% discount (I don’t receive commission for this). At “Better Software” I’ll be giving a talk about the world of startups.
If you don’t speak Italian, you may still be interested in the second conference which is being held at the same hotel in Florence from May 8 to the 10th. The main track of Pycon Italia Tre, is in fact, being simultaneously translated into/from English/Italian. I will be presenting a spin-off that’s geared towards Python, of the talk I’m giving giving at Better Software at this conference, which will feature the very provocative title “Getting rich with Python”. Most of the audience will be composed of Italian speakers, so I’ll be presenting in my mother tongue and a real-time English translation will be provided. I’ll be among some notable company at Pycon Italia, such as Guido van Rossum, Alex Martelli (Google), Raymond Hettinger, David Boddie (QT Software), Ariya Hidayat (QT Software) and Fredrik Lundh (aka effbot), who will be speaking publically about Unladen Swallow (Google’s LLVM-based upcoming project that’s geared towards drastically improving the speed of CPython) for the first time ever. With the exception of Alex (who like myself, will be speaking Italian and have his presentation translated in English), all of the names above will be presenting in English (with a translation in Italian to be provided for those who require it).
Whatever your language, if you are in Europe, Pycon Italia Tre is definitely worth attending, especially when you consider the ridiculously low admission price (€60 for non-students or €40 for students, including tax) – which includes two buffet lunches, four coffee breaks, free Wi-Fi access, a free T-Shirt, free gadgets and randomly selected prizes. Plus, there will be all sorts of social activities and opportunities to hang out. If you plan to attend, register now before all the tickets have sold out.
I hope to see, and have the chance to meet, you in Florence!
Do you really need Venture Capital funding?
One distinctive characteristic of software startups that really sets them apart from other new companies in different fields is the exceptionally slim amount of capital required to get started. The ability to bootstrap is what makes our industry such an incredible business opportunity. Anyone with a good idea, decent technical skills, and a dose of business sense can come up with a profitable venture, without having to give up their equity and hand over control of the company to venture capitalists. And alternatives like angel investors or lower-end funding companies a la YCombinator are legitimate options, given that in most cases the initial investment required is minimal.
In almost any other industry you need serious capital if you plan to go into production. Let’s say that you want to market protective rubber cases for remote controls (to help save them from getting damaged if they take a spill). How do you get started? Regardless of the exact process required to go from the initial idea to the final product, one thing is certain, at some stage you’ll have to pay for the materials and have somebody manufacture your product for you (generally this will be done overseas, where manufacturing is less expensive). Whether your item has been (mass) produced or not yet though, it’s obvious that before you even begin to start marketing your product, you’re going to need some serious funds for materials, manufacturing and warehousing costs.
When it comes to software, in order to create your product all you have to do is sit down and transform the design that you’ve got in head into actual code. If you are creating a web startup, you’ll have expenses like hosting bills, but in most cases such costs are minimal and tend to increase with the size of your user base. As long as you have a solid business model, dealing with the cost of an increasingly larger customer base, is a “problem” I truly hope you encounter, as it likely means your startup is heading in the right direction.
This unique software advantage is underestimated far too often. A few weeks ago I wrote the following line on Twitter:
I’m convinced that startups that are grossly over-funded are far more likely to fail than startups that are slightly underfunded.
There are exceptions to this statement, I’m sure, but think of it like this: if you pour a lot of water into a bucket with a large hole, you’ll quickly find yourself out of water. In Paul Graham’s latest article he mentioned thirteen sentences that describe startups. Unsurprisingly, two of them are dedicated to this very topic: “Spend little” and “Get ramen profitable”.
Unfortunately, I see a trend emerging in which many new startup founders appear to care more about VC money, and the lifestyle such funds can afford them, than the success of their business. The idea of spending as little as possible, and receiving a bare minimum type of salary, so as to “get ramen profitable” is often overlooked. It would seem that the industry evolved from the notion of two hackers in a garage working to change the world with their product, to a bunch of Starbucks latte sipping, four conferences a month attending kids who expect to receive millions so that they can bring their idea to the masses.
All the best things that I did at Apple came from (a) not having money and (b) not having done it before, ever. Every single thing that we came out with that was really great, I’d never once done that thing in my life. — Steve Wozniak, co-founder of Apple.
You’ll find counterexamples to everything I’ve just written, stories of software/web startups that actually needed and were able to justify VC-level funding, but they are, in my opinion exceptions, not the norm. As I come to the end of this quick piece, I wonder if I’m being too cynical. Perhaps, not living in Silicon Valley myself, I have the wrong impression of the way the startup world operates. But even from up here, in the chilly Great White North, I can feel the heat that proverbially radiates from all the VC dollars being frivolously burned.
Developers are blinded by the light
Blinded by the light,
revved up like a deuce,
another runner in the night
— Bruce Springsteen
Humans are exceptionally bad at calculating odds. We let our limited experience strongly influence our perception of the likelihood of an event. For instance, we tend to vastly overestimate the odds of dying due to a terrorist attack, accidental firearm discharge, or a hurricane, and vastly underestimate causes of deaths like falling, drowning or the flu. The reason for this is that the media constantly reminds us of the dangers of terrorism, hurricanes or flash stories about children who were accidentally shot. Seldom do you find stories about a person drowning, falling, or dying due to a flu being reported on the national news channels. News stories have a tendency to be sensationalized, so as to capture one’s attention and hook in large audiences, and as such they contribute to peoples’ bias when it comes to estimating what is, and is not, likely to occur.
Likewise, overexposure to blissfully happy lottery winners holding up their over-sized checks on TV and in the papers tends to distort peoples’ perception of the likelihood of winning by buying a single ticket. A more mathematical and objective approach to the problem would quickly reveal that the odds are much worse than they appear to be on the surface. [1]
I can’t help but notice that this is exactly what’s happening to the development/startup world, too. It’s the new gold rush. Far too many developers are trying to build the next big social network, be the next Facebook (or YouTube), gather crowds in the millions, in the hopes of being bought for a ridiculous sum of money by a large company. The media loves these sorts of stories.
As a consequence, developers who are trying to build the next Facebook are akin to lottery ticket buyers. A few of them will succeed and win, but most will fail miserably. How many social networks do we really need? The ad-supported model works for some lucky companies that manage to attract huge crowds while keeping their expenses to a minimum (e.g. PlentyOfFish) or which get acquired (e.g. YouTube, who is otherwise costing Google money). Everyone else is burning cash and wasting the money and good faith of VCs in the process.
I fear that a lot of developers are blinded by the light. Their perception of the actual odds of “making it” are skewed by the media’s continuous coverage of million – if not billion – dollar acquisitions and success stories. And some VCs encourage this behavior in the hope of seeing great returns on their investments. After all these are very wealthy people, and they’re are not interested in small scale success.
Aside from the obvious waste of time and resources, I think that many developers are leaving excellent opportunities on the table in order to pursue a highly unlikely outcome. The ratio of the likelihood of making 10 million with a traditional business plan and the likelihood of making a billion a la YouTube, is not proportional to the different quality of life that those amounts can afford you. If you are broke, have $30K in credit card debt, or are middle class, you’ll find that 10 million dollars could increase the quality of your life much more than going from 10 million to a billion ever could. And it’s important to understand that aiming at a more likely, albeit smaller, outcome does not in any way prevent you from “dreaming big” afterward, once you’ve already achieved success with your first (or first successful) venture.
Would you rather enter a draw for a million dollars with a 1 in 20 chance of winning, or a draw for five hundred million dollars with a 1 in 50,000,000 chance? A rational person would opt for the first, yet most startups today are leaning towards the second draw. They do so because they vastly overestimate their odds of being successful with the second draw.
Create a product and charge people for it. Unless you really have to, don’t take VC money, instead consider bootstrapping your company. One of the main advantages of the software world is the exceptionally small amount of capital needed to get started. If you want to stick to Web applications, use the Software as a Service (SaaS) model and make your users pay for the software and service you provide. You’ll have a much smaller audience, less scalability problems and expenses, and a whole lot more revenue and a greater chance of being profitable. Joel Spolsky (with his gorgeous office spaces) makes millions in revenue thanks to a company that, for most of its existence, has sold a web bug tracker. How many free bug trackers do you know of? How many competitors exist in that market? Many, I’m sure. Yet while Joel’s popularity no doubt helped his company, it still showcases how a business can be successful by building a better mouse trap.
But like David Heinemeier Hansson mentioned, there are countless under the radar companies making money like that. [2] If you take your eyes off the spotlight, you’ll see that many companies are very successful at what they do, though they’re not famous or making news headlines. Some of them actually strive to not attract too much attention to their success (often measured in millions of dollars), in order to prevent competitors from springing up.
Regardless of whether you’re a household name or not, you don’t even have to create Web applications to be majorly successful. Mobile apps for smartphones, including the iPhone, come to mind. But good old-fashioned desktop applications keep a wide range of software companies in business. That’s why the skewed perception that you can’t make money with commercial desktop software anymore, or that desktop applications are dead, is utterly ridiculous. As a developer/micro ISV/startup, your chances of making money with well designed desktop software are much higher than building any sort of YouTube, Flickr or Facebook clone.
To understand how skewed our perceptions are, you just need to talk with companies who are open to sharing their software sales statistics. You’ll be shocked by the amount of money that’s being made with relatively common software. Balsamiq makes a UI sketching application that sells for $79. The author managed to make $100K in revenue in the first 5 months, mostly by selling the desktop version of his application. And he is certainly far from being one of the biggest winners in this industry. I mention this though because it shows how a decent idea that’s well executed can quickly bring in revenue when you charge your users. And if you think that $100K in five months is small, let me ask you how many free web sites manage to net a comparable monthly income. If you are looking for larger revenues, check out Omni Graffle, which earned The Omni Group millions of dollars, or set your sights on B2B applications (in which market some applications sell for thousand of dollars a piece).
While many developers are blinded by the light, wise ones with a mind for entrepreneurship are building actual software businesses. I invite you to get out there and do the same.
Footnotes
[1] The concepts I summarized here are much more eloquently illustrated by Dan Gilbert in this TED talk.
[2] David Heinemeier Hansson makes a similar point in a post of his which inspired this one.
Random thoughts on software piracy and open source business models
In a recent blog entry, Jeff Atwood discussed the subject of software piracy, bringing up the example of a succesfull indie game called World of Goo, whose estimated piracy rate is about 82% (initially reported as 90%).
Perhaps in an effort to appeal to the ethical side of his readers, Jeff underlines how “this is not a game that deserves to be pirated”, how it’s developed by a team of two indie developers “not another commercial product extruded from the bowels of some faceless Activision-EA corporate game franchise sweatshophow”, and how its low price point makes it affordable (it’s currently on sale for $15).
I understand the psychological reasons behind those arguments, but I don’t feel that their implications are acceptable. No software deserves to be pirated, whether it costs 15 bucks or 3 million dollars, if it’s developed by a single programmer who’ll end up bankrupt or by a huge corporation like Microsoft. Piracy is unlawful, independently from the cost or creator of the object at hand. It is not theft, but it’s still wrong and a violation of a licensing agreement.
Piracy is rampant and the 82 or 90% figure is not far-fetched, I’m sure. The software industry is in fact in a similar position as the music industry. And Jeff gets two important points right. First, there is no point in punishing your legitimate customers with DRM and other inconveniences. It’s OK to “keep honest people honest”, but going out of your way to prevent piracy can do more harm than good, as EA learned through their Spore experience. In December, EA finally released a DRM-free version of Spore on Steam which is considered by many to be an acceptable method for delivering games. According to many people it offers a decent balance between software protection and the level of annoyance for users. Second, it is absurd to assume that the 90% of non-paying users of your software would have bought it if they couldn’t get a hold of a pirated copy. The BSA and RIAA’s astronomical claims in this regard are utter bullshit, which conveninetly ignores both simple economics and reality.
Jeff’s post then goes on to argue that the best anti-piracy strategy is to build a great product and charge a fair price for it. World of Goo itself proves that those two points do not constitute a reliable strategy when it comes to reducing piracy. That game is truly a great product (I don’t like games and even I enjoyed the demo) and it sells for what is arguably a very reasonable price. What’s true though, is that the secret of being successful in the business of software is to create programs that people want, and to price them accordingly so that the legitimate “10% crowd” will be open to buying them. It’s not the best anti-piracy strategy in the sense that independently from the quality and price, people will still pirate your software anyway. It is however the best business strategy, since it’s an appealing offer to your pool of potential buyers.
In addition to that, a third point that actually reduces piracy is offering additional value to genuine users. You could for example reward your customers by providing them with physical goods (e.g. a manual, stickers, posters, etc…), access to an online support community and/or allowing them access to additional sever side services which are not available to illegitimate users.
I think that the lesson here is the same one that can be applied to the music world. Focus on quality, price in a manner that is appealing to your audience, take same basic technical counter measures to keep people honest, and then just ignore piracy. You cannot protect your software, no matter what you do. It’s annoying, but piracy is not going away, so any effort put towards penalizing your paying customers in a futile attempt to combat it, will only hurt your business.
It is also true that other business models exist, even though they are not always applicable to every type of program. For example, Software as a Service (SaaS) takes care of piracy by providing sofware server-side, once users have been charged a fee. This also has the added benefit of enabling a recurring billing cycle that would have been far less welcomed by consumers and small businesses, were it to be applied to a standard shrinkwrapped piece of software. But I don’t feel that piracy is a strong enough argumentation for killing off desktop application development, whenever a desktop app is better suited than a web one for a given job.
Amongst other alternative business models that kill piracy, there are open source ones. The open source world can claim to have accomplished many great things software wise, but it seldom provides viable ways of earning money directly from software. In a rebuttal to Jeff’s post, Dare Obasanjo (a Microsoft Evangelist) provides three open source business models and shows how they rarely fit the reality of B2C shrinkwrapped software. Quoting from his post, these points are:
- Selling support, consulting and related services for the “free” software (aka the professional open source business model ) – Red Hat
- Dual license the code and then sell traditional software licenses to enterprise customers who are scared of the GPL – MySQL AB
- Build a proprietary Web application powered by Open Source software – Google
There may be variations, but those are the main ones. Some people may raise objections against the second point. Why would companies be scared of the GPL? Working for IBM, I’ve experienced a bit of the enteprise world, and let me tell you that Dare is absolutely right. Many companies in the enteprise space are scared by open source software, particularly those programs released under the GPL license (due to its possible viral implications), and wouldn’t touch them with a ten foot pole. I have seen companies spend thousands of dollars on products that were available for free under the GPL license, mainly due to the legal implications of using GPL software.
You’ll notice how none of these models are really applicable to B2C desktop applications. So, as far as desktop applications are concerned, the traditional “Word of Goo approach” is the right way to go.
Moving away from the problem of software piracy, the inadequacy of the main open source model when it comes to the world of shrinkwrapped software brings us to two points that I feel are worth bringing up. Let me prefix this by saying that I believe in the value of open source, but I do see fundamental flaws in the business models surrounding it. The first is that it’s the developer’s right to charge for software they produce. Freedom 2 of Richard Stallman’s free software philosophy (“The freedom to redistribute copies so you can help your neighbor”) works against developers’ best interests. People should be paid for the fruits of their labor, whether copying it is almost free (like in the case of digital content) or not. And this is true for software, songs, videos or any digitally transmissible content.
It’s nice that people decided to volunteer their time to build an empire of free software that’s openly available to everyone. It’s a huge accomplishment that derives from the GNU philosophy, but it should be viewed as the same thing as when lawyers do pro bono work. We shouldn’t expect developers (or lawyers, or architects, or similar professionals) to stop charging for the product of their work. Again, I think it’s great that developers help each other with free tools and libraries for developing programs, but there is no reason why people should be ashamed to sell their programs commercially to businesses and consumers, and make a living off of them.
In fact, selling software, whether desktop, mobile or web based, is a great way of earning money. The proliferation of startups is a testament to many people’s desire to combine their love of the software craft with the possibility of acquiring wealth. “But Antonio, developers can make money by selling support and related services” I hear you say. And this brings us to a second flaw of FOSS. Instead of being paid for writing the best software you can, you get paid for providing technical support to the few people who buy it or the occasional ad-hoc customization. Where is the incentive to provide good documentation and easy to use quality software, when your livehood depends on your customers needing help from you? As a developer, would you rather spend your time building great software or act as a customer service representative? Consulting or providing technical support doesn’t scale nearly as much as software sales do. You can sell 10,000 copies of your application without lifting a finger, but you can’t scale to 10,000 people paying for technical support that easily. Both approaches can bring in similar revenues, but while the first requires an indie developer, the second requires a full blown company with many, many technical agents.
Open source models are fine, when they actually make business sense, but programmers should not be afraid to charge for their software. Trying to avoid piracy by switching to an inferiror business model that gives software away for free is foolish. Accept piracy as a necessary evil, and focus your attention on coding and promoting your commercial applications.
