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Archive for February, 2008

There are a lot of Web 2.0 companies out there. If you don’t believe me, check out Web 2.0’s archive. For every Digg or Twitter there are dozens of sites that provide great services that flame out. Unfortunately, the fault does not lie in fickle consumers or bad luck — it falls directly on your shoulders.

Luckily, most of the worst startup mistakes are things that you can change. What better time than the beginning of the week to take a look at some of them?.

Obviously, The Product Will Sell Itself

Used Car

This is the problem faced by entrepreneurs who start off as pure developers. The idea seems pretty well founded. If you have a great product, people will flock to it. This could not be any more wrong. If Web 2.0 has taught us anything, it is that there are a ton of extremely talented developers out there and many of them have made amazing products. Yet, somehow, there is only one YouTube and Facebook.

What is the difference between a well developed product and a great product? Implementation, of course. Truly great entrepreneurs are able to separate themselves from their products and realize the one real truth of business, “no one cares.” After you have your product put together it is time to get it through your head that your only job now is to cut through the public’s inertia and make them see how important your service is to their lives. Market, market, market. Get yourself out there and scream your unique value proposition from the rooftops.

If you can’t give someone a general idea of why your product is great in one sentence or less, then it isn’t.


People Care About Features!

Confusion

People could care less about your tag clouds and OpenID support. In general, people really only concern themselves with one portion of a product. Most people use YouTube to watch funny videos. Most people use Flickr to show off their great photos. Each of these products has a metric ton of additional features that power users really get behind but the public at large is completely unaware of.

Make sure that your most important features are impossible to miss. Let your users see up front why this product is a handy addition to their lives. Once they are hooked they will look around and see all the other great stuff you have put in. You must understand the difference between product adoption and user retention. Features retain users, they very rarely get them.


What Do You Mean We Don’t Need A Private Jet?

747

No, I am not going to let the CFOs off the hook. Too many young startups, newly flush with venture funding, forget that business finance is a lot like personal finance, “a penny saved is a penny earned.” Remember when you were bootstrapping and you bought all those Dell PCs wholesale for $300 a pop? Why does it seem prudent, now that you have a little capital to burn that you should need $2,000 Mac Book Pros for every employee, even the ones who need computers for little more than Excel and email?

Unless you are turning a profit, most of your money should go towards development and marketing. I am not saying that you should work out of a closet, but wait until you have revenue before you spring for that 5th Avenue suite. Also remember, there are free or cheap solutions for almost all corporate infrastructure problems. You can pick up computers, furniture, and telecommunications services at cut rates if you know how to look. The only thing that you should feel free to splurge on are servers and maybe enough amenities to keep your employees content.


No One Told Us People Would Actually Use This Thing

Dell

Speaking of servers. The next most important thing to remember is that you should have a plan in place to double your infrastructure at very short notice. It is entirely possible that your user base could go from 5,000 people to 50,000 people in a month. If you haven’t prepared for this, it won’t be long before your user base, annoyed at network failures and slow downs jumps ship and moves on to greener pastures.

This is one of those times a little forward planning can really be a life saver. Have a plan written up to tell you what type of infrastructure you would need to handle each new flood of users. Make certain that your vendors know that your equipment needs are in flux and be certain that you are ready to scale up well before the server room bursts into flames.


Early Adopters Aren’t Real People

Replicants

I know I didn’t use a clever turn of phrase for this one, but I think it’s too important for that. What you need to understand, right now if you have not already, is that early adopters are not real people. The geeks, techies, friends and family that initially use your product are not representative of the public at large. Their opinions on your product are not representative of what the mainstream will think.

If your web service is designed to scale, be certain that your marketing machine is not only targeting the digerati. Start getting the word out through newspapers, magazines and publications in your broader field of interest. If you are making an online video recommendation service, don’t only pray to the altar of TechCrunch but also get the word out amongst movie lovers. Make certain that the same people who use Netflix can easily get their head around your product. Understand that, in general, normal people are looking for something that makes their lives easier. They don’t understand Web 2.0 and social media collaboration. In this case, sell the steak not the sizzle.


Huh, What’s Gmail?

Boxing

This should have been point number one. Products can be destroyed before they even begin if you don’t do the research. Take a look around the net and make certain that you don’t have another huge player operating in the space that you want to move into. If it turns out that there is, make sure that you can clearly define how your product is different than their offering.

Also, research how services similar to yours have succeeded or failed. Some of the best advice you can get will come from the horror stories of you competition. An ounce of preparation is worth a gallon of regret.


Web 2.0 Roundup

There are a thousand mistakes big and small that can sink your startup, and the ones that I described are only a tiny subset of them. However, I daresay that these are the most important. Remember, that a web business is still a business and knowledge is your best weapon.

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http://tbn0.google.com/images?q=tbn:jODxvwDw5WyZwM:http://www.masternewmedia.org/images/rmx_jigsaw.jpg
Thinking about building a web app? Not sure what web application you should build? You probably have a few ideas kicking around, maybe you’re thinking of building a project management application, maybe a video sharing site, or a social networking site. Heres a tip to help you choose:
Build a web application that helps its users make money.

Why?

Because people can justify paying for a service if it helps them conduct their business and make money.

Thats ONE of the reasons for the success of 37signals products. Their core products, Basecamp, Highrise and Campfire all help people conduct business and make money.

If you help people make money you can also charge a higher cost for your web app. Its not reasonable to spend $49 a month sharing your videos, you wont find many people willing to shell out that kind of money on a recreational activity. But it is reasonable to spend $49 a month running your business. If you build a web app that makes people money they will pay more, a lot more, to use it.

Also if you’re helping people make money, there’s another side benefit. When you’re in charge of running a business you usually want the best equipment. For example, if you can afford it you would upgrade your typical office chair to an Aeron. Its somewhat similar when it comes to web apps. Entrepreneurs won’t settle for a standard plan when they can upgrade to a premium plan. Choosing a premium plan over lesser plans intrinsically shows you and your employees that you’re serious about business.

Its like choosing Windows professional edition over Windows Home edition. A lot of business’s could get away with using Home edition but they’ll purchase professional edition anyway. Business owners don’t want their employees seeing HOME edition when they boot up, they want their employees to see their running professional. There’s also an element of human nature, rather than doing more work its easier to show your dedication by purchasing better equipment.

Expect the same with your paid plans. If your application helps people conduct business your users will be more receptive to upgrade their plans to a higher cost premium plan. If you have an app that people are using recreationally it will be much harder for you to convert them to higher paying plans.

So if you want to build a web application that makes you money, then build a web application to help make others money.

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Post Author: David Rusenko is a founder at Weebly, a company that makes a web creation tool.

I, [David Rusenko], first started working on Weebly in February 2006. I worked for about a year on it with Dan and, later, Chris’ help, and we launched a (very) early version of Weebly in mid-November 2006. We were TechCrunch’ed a few days later, and accepted into Y Combinator the same day. (On the morning of our YC interview, we woke up to discover we were on TechCrunch).

Weebly has been growing ever since then, gone through two complete visual redesigns, added numerous features, and doesn’t even resemble the product we launched with at all.

Here’s two of our graphs from May 8th 2007 — five months after we moved out to San Francisco and had been working on the product full-time:

The first is a graph of our new signups per day, and the second is a graph of our total user count per day. I’ve annotated the top graph with what events caused the major spikes.

There’s actually two very interesting things to note about the top graph: First, we had already closed our angel round at this point — looking back, our investors placed a huge amount of confidence in us.

Second, the new users per day looks like it might actually be declining a little bit.

At this point, I’d been working on Weebly for about a year and a half, and we’d been launched for over six months. Judging by the graphs, you might think things weren’t looking spectacular. This is the type of situation when people give up.

I’ve seen it quite a bit among startups — they spend more time developing the product than they do running it after they launch it. Several have followed the same pattern: build, build, build, launch, quit.

But you’ve got to keep with it to gain momentum. It doesn’t usually just build overnight, it takes time. Keep building your product, and eventually you gain momentum and a critical mass of people who know about you and tell others about you.

Now, here are the graphs from a couple weeks ago:

These graphs look a hell of a lot better. There’s 2 things I’d like to point out:

- First, the “build it and they will come” mentality is a fallacy. You need to build something great and have distribution in order to succeed. And distribution is hard to get.

There are many ways to get distribution. One of those is through press. If you have a great product, the more people that find out about you, the more people will know about you. And they’ll tell their friends, who’ll tell their friends, etc.

Another subtle press benefit: you’re getting links from a bunch of very highly-regarded sites, and this helps out your rankings in search engines quite a bit, which builds more traffic.

There are plenty of other good ways to get traffic too, such as engineering for viral growth, but press can have huge benefits for the right product.

- Second, in order to get people to use your product, you have to stay alive. This sounds obvious, but a ton of people spend 6 months building a product, launch it, and give up within 3 weeks.

Plain and simple, it’s going to take time for people to start using your product — there are exceptions, but it’s generally not the norm. So you need to expect that, and be willing to give it time. If you give up within a month or two, your product definitely won’t be successful.

Once you launch, people start to know about you. If you launch early, you can start earlier on the process of acquiring users. Don’t launch with a crappy product — launch as soon as what you have is better than what is out there. But don’t wait for a perfect product — launch as early as you can, get user feedback, and keep improving the product.

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Article Author: Matt Moore.

I [matt moore] postulate that every single successful technology company has had a winning distribution model.

Success of a product, and any business for that matter, can be measured by two simple rates:

  1. usage, how much a customer/user comes back and use your product again and again, and
  2. user growth (a.k.a customer acquisition), how many new users are finding and using your product

Obviously, both are important areas that products must have a successful strategy for – but user growth is at the heart of measuring success of distribution.

In fact, distribution is one of the most amazing aspects of the internet – it’s revolutionized distribution. It’s now able to be faster, broader, and more targeted all at the same time. Directories, and email started this revolution. It moved to search engines, advertising, and simple syndication. And it will continue to revolutionize, as we are seeing through social means (e.g. Digg & Facebook).

Famous Examples

Not sure if you believe me yet? Let’s take a look at some great examples from the past… and even the present!

gates-centerfold.jpgMicrosoft > IBM
Microsoft was paid $50,000 by IBM to put its operating system on every IBM PC that was sold. Killer distribution for a startup!

google50.jpgGoogle > Yahoo!
Yahoo chose Google for providing its search results, before it decideded to try to compete with them in search. Not before Google milked this distribution, obviously, and people went directly to google.com.

ipodphones.jpgApple iPod > Viral
Although I believe Apple started with a viral product (particularly because they were bad at partnering), the iPod is an even better example. A keynote and ads started the iPod revolution, but the genius was that they built viral distribution into a physical device: the white headphones – make any product a (fashion) statement, and it can be viral.

ppal.jpgPayPal > EBay
It was way easier then check & money orders, and the acquisition proved it. Product and network affect were important players as well, but initial distribution went a long way.

chad_n_steve_of_youtube_tn.jpgYouTube > Viral – blogs & email
Clearly the big winner of the acquired companies recently. It made sharing via blog embedding and emailing so easy, people couldn’t help but show their friends how to waste time too.

scribd.gifScribd > Digg
A much more recent example, at least from what I’ve heard, a great portion of Scribd’s traffic comes from the fact that its documents frequently get dugg. Obviously, there are similarities to YouTube as well, so viral distribution is also at play.

logo_beta.gifiLike > Facebook
The power of the newest form of distribution on the web, social sites like Digg & Facebook. Facebook apps, can get more than a million installs in 3 months. And it’s all due to the power of the social graph. Something to keep an eye on.

So How do I Distribute My Startup Product?

This begs the question of how to follow in the footsteps of these companies and design a successful model for distributing your product. Big companies have it easy – they typically rely on money to solve their distribution problems. They can easily afford large marketing budgets and big partnership/distribution deals.

But the internet is the great equalizer, and it will only continue to become more that way. The most popular, but incredibly difficult to pull off explosively well, is viral marketing. It’s still hard because it has to be inherent to the product – people have to intrinsically want to share the use of your product. Only then do the features that enable viral distribution matter, as Andrew Chen explains in Viral Marketing is Not a Marketing Strategy (talk about link-bait!). His tip: don’t think about what viral features you can add, but rather how your product fits into an intrinsic, viral loop. Another way to think about it is why will your user contact their friends about your product, strictly for their own selfish reasons? This could include being perceived as being intelligent, fashionable, fun, or humorous.

Even for viral applications, it can help to use a viral distribution product (and/or platform) that already has traction, like Digg or Facebook. Almost any truly viral applications can exploit the use of these networks, and quite easily at that.

Of course, not all products can be inherently viral. But, of course, you do NOT want to be selling to one customer or user at a time. Aside from the normal online distribution methods, like SEO & link-building, you *have* to find a distributor. Online distributors are typically easiest to find, whether it be the expensive Google AdWords, or some other online advertising. What might be more interesting, depending on your market is affiliate networks – where you pay someone every time they generate a sale for you, on (and even offline). I’ve always thought that college students would make great affiliate marketers, if implemented correctly (I mean, painting, for god’s sake? there has to be something more interesting – not that I want to upset paul)!

Other strategies including partnerships with real businesses require true salesmanship. There are lots of companies out there looking for a partner to do exactly what you’re doing (more than likely), so you just have to go to relevant industry events (a LOT of them) and meet the people in the companies you want to make relationships with. Amazing things can happen just by talking to a lot of people. Of course, this takes time, and you have to love it. At least, someone on your team has to. And be sure to practice spinning your product and company.

But I believe something better will be built out there for distribution of products, using social-like distribution strategies, but for products that aren’t inherently viral. I mean, searching for something you need after you know you need it is so 2002. The next stage in distribution is when great products are put in front of people who need it so they stumble upon it — before they even heard of it, and before they knew they needed it.

Authors Blog.  Due Credit to Matt Mooree

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