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How To Start a Daily Deals Site (Part 1)
The success of LivingSocial and GroupOn has garnered a lot of interest in their business model. Almost every content site is evaluating whether they should add a daily deals component to their business. This is a guide to decide whether or not you should start a daily deals business, and if so how to go about doing it. I take a very metrics driven approach. If you are evaluating this from a marketing and strategy perspective, I would refer to Yipit’s guide here.
As a metrics consultant, I have helped a number of companies in the daily deals space through this process. As a word of warning, this is EXTREMELY hard. The simplicity of the user-facing software makes this business look deceptively easy. All of the complexity is hidden behind the scenes. That said, here we go.
Part 1: Should I Start a Daily Deals Business?
Lesson 1: This business is about user acquisition, not deals
In the early game, this business is about user acquisition, not deals. I’m going to say that again because this seems to be the least understood piece of this business model. This business is about user acquisition, not deals. Relatively speaking getting deals is a cakewalk compared to getting users onto your email list. At this point you can completely forget about the deals.
There are two questions you need to answer:
Can I consistently sign-up 4,000 users to my email list every week?
Are there enough people in you intended market, with a crystal clear channel to reach them, to support 4,000 new emails every week? If you can’t see how this is possible, then it doesn’t make sense to start a daily deals business. I will get into the logic behind this in a bit.
Can I afford to acquire 4,000 users every week?
If the channel you identified is paid, can you afford to acquire 4,000 users per week?
The answer is going to change depending on the business you’re in and how much money is in the bank. I will go into further detail on this as well.
Lesson 2: After user acquisition, all your resources should be focused on data
Why you need at least 4000 new users per week
This is a metrics driven game. You can run an entire daily deals business on a spreadsheet, and there is a calculable answer to almost every decision you will come across. That makes setting up your metrics of paramount importance, second only to acquiring users.
A good way to illustrate the challenge you will face is to use the example of a plumbing system. If there is only a trickle of water passing through a new plumbing system, you can’t tell if it’s working and where the leaks are. You need full water pressure to figure that out, so your goal is to get to full pressure as quickly as possible so you can determine what works and what doesn’t.
This is a simplification of statistics, but you need about 40 data points to start to draw conclusions from data. Lets assume your emails convert at .2% into a sale. 4000 x .2%= 8. You need 4000 new emails to get 8 sales per deal. 5 deals x 8 sales per deal = 40 sales per week, a number that you would be able to draw significant assumptions from.
At this point you’re probably asking why at week 2 I am not calculating 8000 X .2%. As you learn more about your audience and how to merchandise deals to them, this will become the correct calculation. In the early stages your churn is going to be incredibly high. Here are some assumptions you can make.
- About 5% of the users that sign-up will buy something.
- About 20% of those that buy, will buy an additional time.
- A user will buy in the first week they sign up or not at all. This will extend to a month and beyond as you optimize.
Your user list is really as large as the number of people you acquired in the last week. This should get better as you optimize, merchandise, and acquirer users more efficiently, but this is typical of an early stage daily deals site.
There are a few caveats to this. Sometimes the first batch of users specifically sought out the site and is therefore highly engaged. As you expand the channels you are using to acquire users, you will find the quality of those users will decrease. I’ve also seen sites nail the product market fit out of the gate, which will result in a low churn rate. This is more typical of niche deal sites. The final caveat is if you have existing traffic that you are converting into daily deal users. The metrics around this are a bit different.
How to Acquire users
You probably fall into one of two camps. If you already have a content site with users, you are evaluating whether you can convert those existing users into daily deals customers. If you are starting from scratch you are evaluating how much it will cost to acquire users.
I have existing traffic:
If you fall into this camp you will need to decide what % of your users will convert into daily deals subscribers. One option is to send them deals without asking for them to opt-in, but I would advise against this. When people start receiving daily emails that they didn’t sign up for, they generally click the Spam button. This will hurt your email deliverability in the long run.
These are the three calculations that you need to consider:
- What % of my current registered users will opt-in. You already have a sizable list of users, and now you need to determine what percentage of them will opt in to your new deal product. You only do this calculation once in the beginning.
- What % of monthly NEW REGISTERED users will also opt-in to receive deals? You know how many users register on a monthly basis. What percentage of those users will opt in to receive deals? For example, if you have a check-box to opt-in at the end of your registration process, what percentage of users will click it?
- What % of monthly NEW VISITORS will opt-in. You may decide that capturing a visitor’s email for the purpose of sending them a deal is more important than sending them through the complete registration process. For example, you can direct all incoming traffic through a landing page like Groupon’s with nothing more than a field to enter an email address. Or, you can pop-up a window as the user browses asking them to enter their email.You might be tempted to calculate this based on all Visitors, but it will skew your results. You will double count visitors that are registered and visitors who have already passed on singing up. Determining conversion just based on your New Visitor traffic is a safer bet. You can get this data from Google Analytics.
The correct conversion rate is a function of how aggressive you’re willing to be in encouraging victors to sign up. If you check out Groupon.com there is nothing on the page expect the box to enter an email (clear you cookies). That’s the most aggressive you can be, and will also be the highest converting. Assume a 23% conversion rate on that page into an email address, and 10% or lower if you use anything softer.
I have no traffic.
If you don’t have traffic then I would think long and hard about getting into this business. If you decide to go ahead anyway, make sure that it’s in a niche where the population is extremely easy to reach in a consolidated way. If the population is a tight knit community with a few powerful channels that reaches them, then you have a sustainable method of acquiring users. If the population of that niche is a bit scattered, undefined, and there is no specific channel that you can reach them through, then you might want to reconsider this business.
Assume you will spend $10 per email address. You can lower this cost as you optimize, but it will hover around that level in the beginning. $10 X 4000 emails per week x 4 weeks = $160,000 per month, and that’s barely spending. The big guys spend 20+ million per month. Make sure you have some serious capital to get going.
Lesson 3: ‘Great Deals’ is not a user acquisition strategy
Every new deal site is convinced that great quality deals will attract organic users. This is false. You are probably thinking to yourself that your industry and your deals are different, but I promise you this will not work. Deals just aren’t that viral, and even great ones don’t bring in a lot of extra traffic. They do bring in some, but it’s not enough to rely on this as an acquisition strategy.
But what about the Living Social/Amazon deal?
If you get a deal of that magnitude with full press coverage, then yes, it will drive new users. That’s not a sustainable model, and the users that you acquire will likely be of the lowest quality. They are coming for just that deal and have no interest in whatever else you’re selling.
Having great deals is a user retention strategy. It keeps your existing users engaged so they don’t churn. Having a mega deal every so often is a very effective way to re-engage users that have stopped paying attention. It makes them think, wow, I don’t want to miss another deal like this, better keep reading.
Deals per month
You should be sending about a deal every workday. 5 deals per week X 8 weeks = 40 deals. In two months you will have a complete data set, although you will be optimizing along the way.
It will seem strange to send out deals as you ramp up your list since you know that you don’t have enough users to really make money. That’s okay for now. Your goal at this stage is to obtain data to make decisions, not to make money.
Local vs Global Market
If you are going to get into the local daily deals business then you need 4000 users per month, per market. You will also need 20 deals per month, per market. As you can imagine this gets expensive. Conversely, if you pick a market segment that can be served by deals anywhere in the country, you will make things a lot easier and cheaper for yourself.
Generic vs Custom deals
There has been a shift away from deal sites that offer generic deals like a spa package, to deal sites that offer highly curated custom experiences. Curated deal sites offer packages like a hotel, event tickets, after party, and dinner that you couldn’t buy otherwise. The upside of this model is that you are offering a differentiated product and an experience that can be “on brand” with your site. The downside is that these take a lot more time and effort to set up, and figuring out what sells is even trickier. Despite the downsides, there is very little room for generic “spa/restaurant” deals as LivingSocial and Groupon have gathered up the majority of that space.
Part II: How to set up your metrics – Coming soon, so follow this blog!
Life After Digital: Someday The Internet Will Disappear
It occurred to me today that my generation will leave little behind of the culture we created.
We won’t build anything like a Grand Central Station, cathedral, monument, or pyramid. Everything we build is temporary and will shortly disappear.
Our culture will be gone too. Written documents will go out of style with printed books to make way for cheaper and more efficient digital files. The day we make the full transition to the digital world will be the day that the cultural trail goes cold.
In the irony of being the most documented, over sharing generation ever to live, that digital information will be lost. Services will shut down, technology will change, and the electricity may one day go out. A hiccup in our civilization caused by war or worse will cause the network to crash. It wasn’t architected for the relentless erosion of time. It’s built on a flimsy patchwork of services that barely work when given the constant attention of engineers.
If the system goes down, even for a brief time, all that data will be gone. It will be locked on magnetic disks and memory chips in ones and zeros, and we will lack the precise technology to decipher them. Our focus will be on getting the system and our civilization back up and running. The task of figuring out how to retrieve all of that data will be insurmountable. It will be stored on machines that no longer work, in software that no longer runs, written in languages that are no longer used.
It’s already happening. The data and high quality footage from our first moon landing, a seminal event for our civilization, is locked on giant reels of magnetic film. There are no machines left to read their contents; it might as well not exist.
The digital representation of our culture will become dead bits, and instead of reviving them we’ll start over. My blog seems like the perfect place to lament this eventuality. In a short time it will disappear, along with everything else posted here.
The End of the Social Network Era, the Rise of the Social Circle Era
Cross posted from my guest contribution on Business Insider.
Blippy failed because they didn’t understand social. They built a product to broadcast credit card purchases. They based their social features on the model, “Friend Everyone, Share Everything.”
This has been the mantra of social software since the rise of Facebook and that era is reaching its end. Going forward, sites that follow this model will fail, just like Blippy, Apple’s Ping, and Google’s Buzz.
I’m not saying that people will stop sharing their every thought, photo, and link. People love this freedom of expression. Facebook, Twitter, and LinkedIn will be fine because they form the foundation of the social web. They are the proverbial phone book for our society, and that’s a necessary function. The last five years has been the rise of the Social Network as a utility platform. Now that it’s created, the next five years will be about building on that foundation. New social apps will focus on sharing with select groups of people. In that sense, The Era of The Social Network has ended, and we are now entering The Era of the Social Circle.
To illustrate how I see this flux happening, I turn to birthday parties.
When a pre-schooler has a birthday party they invite the entire class, which constitutes everyone they’ve ever met. It’s not until years later that they develop friendships and social circles that form the basis of inviting one person over the other.
Social Networks are like that pre-schooler’s party. Rather then being made up of “friends”, they are repositories of people whose existence you acknowledge. You connect with everyone you’ve ever met because the tools have not been developed to create more complex social circles that make up mature adult relationships. It makes sense that the evolution of digital social will follow the same developmental path we take as humans.
Social Networks are characterized by, “Friend Everyone, Share Everything.” Social Circles will be characterized by “Group Dynamically, Share Selectively”.
Social Circles will focus on groups, automatically created based on a person’s real life social circles. They will dynamically shift to include new close friends and remove those that become distant. “Friends” will come to mean the same thing as it does in the real world, a group of people whom you share a close connection with. Content will be shared selectively with those that it’s most relevant to, mirroring the intimate sharing of real-life friendships.
I can already hear the arguments that Social Networks allow for this type of interaction. They don’t, and let me prove it you.
I’ve had this conversation again and again in the last year.
Me: Do you use a check-in service
Them: No
Me: Why?
Them: I don’t want EVERYONE to know where I am
Me: But you don’t have to let everyone know where you are, just add your closest contacts as friends
Them: That won’t work. I use Facbeook and I get friend requests from everyone I’ve ever met, I feel bad, and then I accept them.
When people talk about privacy concerns around check-ins, it’s not that they don’t want ANYONE to know where they are, they don’t want EVERYONE to know where they are. The problem is the lack of tools to create the dynamic, intimate groups of people they would be comfortable sharing with. Once that problem is solved, this space will see a huge uptick from mainstream users.
Facebook has quite a few tools for managing groups of friends. These fail because they rely on the user to manually curate these groups. Users won’t do the manual work necessary to make a Social Circle work, just like they won’t be selective with whom they friend on a check-in service.
Solving this problem is going to be very tricky. If you want to know why Path and Color were able to raise so much money, it’s because they are tackling this problem, not because they solved it. The investors were placing a bet that if anyone can solve something as difficult as this, it will be those teams. As for me, I’ll place a bet on anyone that’s willing to put “Friend Everyone, Share Everything” aside to build software that “Groups Dynamically, and Shares Selectively”. That’s what we’re doing with our app Matchbook, which is for bookmarking place recommendations. If we take our cue from human development, it’s going to be hard, but it’s time to grow up.
Matchbook Launches!
Today, Matchbook is available worldwide in the app store. You can download it here.
Matchbook is a dead simple bookmarking application for places like bars, restaurants, and shops. The idea is akin to taking a matchbook from a restaurant or bar so you remember to return to that spot.
Lets say that a friend recommends that you should stop by the Ace Hotel:
- You search for Ace Hotel or click “I’m walking by it” if you’re nearby
- Matchbook pulls up Ace Hotel and you simply click “bookmark this place”
- At this point you can add a note or tags to describe the place
- Your bookmarked places are automatically organized by neighborhood and viewable on map
- You can run a search such as, “I’m looking for a place in the West Village that’s good for a date”. It will return the best places from your bookmarks, as well as the top saved places from all the other users.
That’s Matchbook in a nutshell, but there are a few other cool features we built in to make sure the experience is silky smooth.
- There is a bookmarklet to instantly send places from your web browser to the app, similar to Instapaper.
- Registration/Login is not required to use the app
- All bookmarks are stored locally so the app works in the subway
- You can share a place with a friend via text message. It includes the name and address in the body of the text, automatically creates a Matchbook account for the your friend, adds the place to their account, and provides a link where they can retrieve it.
We believe in building software that has its roots in the already occurring behavior of people outside the tech industry. Before we wrote a single line of code, we did a lot of user research. We knew that females have been slow to adopt location based services due to privacy concerns. We wanted to find out what women would be willing to do doing around location.
After speaking with hundreds of women we found a very pervasive pattern. A huge percentage of them already had some method of bookmarking places, such as emailing themselves or writing it in their notepad. Despite doing this work, they explained that the result wasn’t useful because the places weren’t centralized or organized on a map. Matchbook solves this problem.
Since privacy was the number one reason women shied away from other location services, we were very conservative with social features. We see this as a growing trend with apps like Path, that are socially cautious until there are better solutions for the elastic social network problem.
As we move forward, “where you are now” is only going to be one part of the location-based space. We are asking the question “where do you want to go in the future”. Ultimately it’s a different way to capture location data that will be used to tap the $140 billion dollar local ad market.
You can download Matchbook here
Location Based Space: State Of The Union
Cross posted from the Matchbook blog.
Of all the emerging tech sectors, Local remains the one with the most potential. This post is an overview of where we are, what we know and where the opportunity lies for the local market.
The $140 Billion Market
The local advertising market is estimated to hit $140 Billion by 2013.
via Marketingcharts.com / BIA’s Kelsey Group
Traditional local ad spend will decline while digital increasingly takes over. Traditional encompasses newspapers, direct mail, television, radio, print Yellow Pages, non-digital out-of-home, cable TV and magazines.
Where will that money be spent
Often when the Internet sets it’s sites on an industry the market size shrinks to fraction of it’s prior levels, and the remaining market is swallowed be a single player. In the case of the local ad market, neither happened. The size of the market has remained relatively flat and no one dominant player emerged to capture those local digital ad dollars. Digital will take up an increasingly large percentage of the local ad market, but it’s unclear where those billions will be spent.
The Market Proof
In 2010 Groupon proved the local ad market is still out there, and it’s vast.
Groupon showed that :
a. Local ad dollars can be accessed through a direct sales force. In this case the ad dollars were spent in the form of discounts instead of upfront ad costs.
b. Consumers are extremely receptive to local advertising, particularly when it revolves around a discount.
c. As the fastest company to $1 Billion, they gave credence to the chart above. It seems very plausible that $140 Billion in advertising revenue is indeed waiting to be captured.
How to Access This Market
The driving force behind the Yellow Pages, which accounts for about $13 billion of the local ad market, is their direct sales force. Unfortunately “direct sales” became a dirty word in tech, often followed by words like unscalable. What we’ve learned is that local merchants are not always sophisticated enough for self service models which is why Adwords has not completely dominated the local market.
The Blunt Hammer of Daily Deals
Here’s how daily deal sites work: They email an undifferentiated deal to millions of people based on the concept that if they send it to enough of them, X % will buy it. This is a very blunt way to sell something.
As daily deal sites have become more sophisticated they segment their email lists based on the data available to them. This includes past purchases as well as publicly available demographic data such as age and gender. They then send deals to the segments most likely to buy them. For example, they would send a spa deal to woman instead of a man. After doing this, conversion rates dramatically increase. Even so, this is still a very crude form of segmentation.
The result of this will likely be consumer burnout. The volume of deals that are uninteresting to any one consumer, fighting for space in an overcrowded inbox, will quickly cause fatigue. I believe that this model will last in its current form for 1-2 more years before consumers are completely burnt out on it.
Sophisticated Segmentation: The Check-in
Foursquare was valued at $100 Million. Facebook, Google, and many other technology companies have tried to build a check-in app. The reason they’re so interested in this market is because they want to capture data about a users location, like where they are and what types of places they frequent. They then want to use this as a conduit through which they can target local deals specifically tailored to the consumer.
This is the sophisticated method of tapping the $140 Billion local market, which is much more refined than sending out an undifferentiated email to millions.
Unfortunately, the mainstream market does not seem to be interested in the check-in. Make no mistake, Foursquare is a revolutionary product. The mass market is often fearful of the revolutionary and I think that’s exactly what’s happening here. When you ask your average non-tech savvy, mainstream female why she doesn’t use Foursquare, she’ll list off objections that have very little basis in the reality of how the app works. Despite this, the fear of “letting everyone know where they are,” seems to be pervasive across that demographic.
Foursquare is no stranger to this issue and it’s my belief that they will overcome it in time. They have made strong moves with features like Explore to provide other reasons to use the app outside of the check-in and I suspect they will continue to do this as time goes on. However, a state of the union is a description of how things are today and I think this chart illustrates it perfectly.
via BusinessInsider.com
These three venues were tracked over a period of 4 weeks. The bar in blue is Foursquare Check-ins and the bar in red is Facebook places. The chart was meant to illustrate how Foursquare still dominates the check-in market after the Facebook places launch. Foursqaure has a vastly superior product to Facebooks, but that’s not what’s interesting about this chart. Facebook Places was exposed to 500 Million people. 250 Million use the mobile app every month. Even if their product was terrible, the conversion rate on people trying it out should have blown Foursqaure out of the water. I think this graph should be read like this: Interest in Checking-in – Tech Adopters vs. Normal People
I think the Foursquare userbase is representative of the early adopter market, while the Facebook users base is representative of the mass market. This chart tells us that the mass market is not buying into the check-in value proposition. It’s more of a barrier than a conduit to the $140 billion. As I said this will change over time, but this is the reality of the current situation.
The Opportunity
There is vast opportunity in capturing local data about the mass market that does not revolve around the check-in. Innovation in the location space will come from experimentation with value propositions other than “where are you right now?” Where do you want to go? What do you want to make plans to do? Where have you been? These are all interesting questions. What’s more, they don’t bring up the same “stalking” fears that the check-in evokes.
The sector that is set to explode in the next few months is capturing the places that people want to go. People have a need to remember bars, restaurants, and shops that they pass by, read about, and have been recommended to check out. Apps that create lists of places that people want to go will be the next big wave for local. There are already a number of players circling this, myself included. That clearly biases my view on the space, but it also gives me an early look at what’s happening.
Here is the pitch to the local merchant: “We have a list of 1000 users that have said that want to come to your restaurant. What would you offer to entice them to come to your restaurant tonight?” This is very different from the check-in pitch which is: “We have 1000 users that are somewhere in the area. They might be looking for a another place to go, you might be the type of place they are looking for and if so, what would you offer to entice them into your restaurant?” The second pitch is interesting, but the first one is much more concrete. We have people who want to come to your business, give them a reason to make tonight the night.
In the next few months there will be an explosion of apps with varying takes on capturing this data.
Summary
1. The local advertising market is still out there and largely untapped.
2. Direct sales is the most effective method to reach local merchants.
3. Targeted deals are the most effective way to increase conversions on consumers.
4. Data around a users local activity is extremely valuable in targeting deals.
5. At the moment, the check-in does not seem to be the method of gathering location data about the mass market.
6. This leaves ample opportunity to find other value propositions for the mass market that encourage them to share location information. Chief among those opportunities is capturing where people want to go.
This infographic captures the current state of local, and local is about to get very strong. Click to see a larger version
click to zoom
Lean Startup Guide to Building Software For Normals
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Cross posted from Matchbook
Next week we’ll be releasing an app called Matchbook. Signup to be notified when it’s out. We’re a proponent of the lean startup methodology, so we wanted to share the process we used to get this app out the door.
We like to build software that mimics real life. The goal of software should be to make already occurring behavior easier, not to create new behavior. So, if you’ve ever taken a matchbook from a restaurant to remember it later, then you have an understanding of what this app does. Matchbook is a dead simple bookmarking application for places. When someone gives you a recommendation about a bar, restaurant, or shop you can bookmark it. The app will organize those places so you can make a fast decision about where to go out. We’ve heard it described as Delicious or Instapaper for places.
Step 1: Problem Identification
I called up a buddy I often discuss tech with and said, “Something is nagging me about the location based space. It doesn’t feel like mainstream America is quite ready for the check-in.” The question became, “What type of location based activities are normal people ready for?”
Step 2: How We Answered That Question
Mobile location research should be preformed in real locations, outside of the office. To answer our question we sought out feedback from normal people instead of from the tech industry.
To achieve this we planted ourselves at a bar, approached groups of people, told them we were about to build an app, and asked some questions. We also used the dating site HowAboutWe.com to go on dates so we had the undivided attention of a female for market research. No judgment; we paid for dinner. This turned out to be a great place to do market research because:
- There was a high concentration of normal people in our target market, which we identified as 20s-30s.
- Groups of friends could more easily talk about how their real-life interactions work.
- It was easier to motivate ourselves to do market research since it involved going to a bar, drinking, and getting girls phone numbers.
This is what we found:
- A very large percentage of urban women have some method of bookmarking places. This includes emailing themselves, TXTing themselves, writing in the notepad app on their phone, adding an event in their calendar, and keeping a spreadsheet or google doc.
- The percentage of women that did this increased when they were an iPhone owner.
- Despite taking the time to remember places, most of them admitted that doing so was ultimately useless since the data was uncentralized and unorganized.
- Restaurants, bars, and shops were the most commonly bookmarked places.
- These same women were generally uncomfortable with the idea of broadcasting their location. Sharing and social media in general did not seem to be something they were thrilled with.
Step 3: Prototyping
We started wireframing the app in Omnigraffle. We spent most of our time removing features until we had what we thought might be the minimum viable product. We went back out to the bars and tested them. We rigged up a clickable prototype with a great app called Interface that allowed us to do our user testing. We would get a nights worth of feedback, re-do our wireframes, and then go back out. We iterated through this process about 30 times.
We kept going until:
- People stopped getting confused
- They could get through the app without any friction
- They stopped asking questions about how to use it
- They started saying “Wow, I would use this!” without prompting.
Step 4: Pivot 1
When we began, we thought that Matchbook would be a social app. We envisioned it helping people make plans, share tips, or share bookmarked places. As we talked to more women, we found that they were a little burned out on social and a more then a little concerned about sharing their location. The number of women that perfectly articulated the social circles problem was amazing. As a result, our wireframes pivoted away from social and became a personal app. We will probably add in social in the future, but we need to rethink exactly how that should work for this market.
Step 5: Minimum Viable Product
The MVP is a bookmarking application for places. The user can:
- Search by text or click “I’m Walking By It” to find the place they want to bookmark.
- The user can bookmark, add a note, and add tags.
- Bookmarks are auto-organized by neighborhood and on a map
- Users can run a search by tag. It will return places that match their search, as well as the top places from all the other users.
- There is no social component at this time.
Step 6: Development
Once we had our MVP, we moved onto the development phase. We outsourced the entire thing, which involved a good chunk of time spent iterating through developers instead of code. That will be the subject of another post, but in the end we found a great team. My co-founder and I developed the entire thing for about $10,000, paid for out of our savings.
Step 7: Launch
A key problem with building an iPhone app is that Apple only allows 100 slots for beta testers. This was rough as we tried to test our assumptions. We needed to ASK all of our users to download it, which skews the data.
After some brainstorming we came up with an alternative. We are going to launch in the Canadian app store first. Since we can’t do a private beta, this will be our beta test. People in the US can’t see the Canadian app store so we will localize things there. We’ll use our Canadian launch to get feedback and gather metrics.
Once we’ve iterated based on that feedback we’ll launch a more polished product in the US app store. The idea is to couple the download traffic from launch PR, with the iTunes Recently Released app list. This concentration of downloads will hopefully bump us onto a Top Downloads list in our category.
These are the assumptions our lean process has yielded. We will be testing these in Canada next week:
- There is a ‘need’ to capture a recommendation made for a place.
- A large population of women in urban areas currently saves place recommendations by some method.
- There is a ‘need’ to consult a repository of past recommendations when making a decision on where to go out.
- The output of the work currently being done to capture recommendations is not useful for making a decision on where to go out.
- That pain-point is acute enough for people to change their current behavior for a better solution.
Step 8: Customer Development
We started with this step at the same time as Step 3. We decided that offering local deals is the best bet for monetizing a location based startup. Since we don’t have the money for a sales force we began our customer development process by speaking with group buying sites. We found out that they:
- Loved the idea of accessing users that have indicated where they want to go.
- They want to send users deals for places that they have bookmarked.
- They were willing to pay a fairly high cost-per lead or a reasonable flat fee for pushing a deal onto our platform.
To better understand the group buying market, we offered to help out a NY based group buying site with their metrics. This gave us enormous insight into the types of challenges our customers face, and we learned great tactics for optimizing daily deal sales.
That’s it for now. The app will be out in Canada in a week, and out in the US shortly after.
Thank for reading,
-Matchbook
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Path’s Playbook For Appealing To Normal People
Today was the launch of Path, a photo-sharing app that has received a good deal of hype in the weeks leading up to the launch. The product principles that the Path team used are genius, and the tech press is completely missing it.
The tech blogs seem aghast that Path would dare to put out a product without standard social features. What they are missing is that Path is an app built for the mass market and not for tech early adopters. They omitted these features because normal people don’t need them.
Normal people do not have hundreds of friends that they want to share things with. According to Dr Marlow, the “in-house sociologist” at Facebook, the average number of Facebook friends is 120 and the average number of people that one user actively interacts with on the service is between 7 and 10. I think this correlates very closely with the real world. At any given time you only have close relationships with 7-10 people. Dave McClure wrote an excellent post on the need for intimacy in social networks and Path is a great example of how it can be done.
I want to break down three important pieces of Path’s product strategy for appealing to the mass market by keeping things small and intimate.
On Path, users can’t search through their Gmail/Facebook contacts for existing friends:
On most social apps, the service will check a user’s Facebook and Gmail contacts to see if any of their existing friends already use the service.
The problem is that Gmail and Facebook are filled with contacts that you are not close with. As a social app becomes more popular, there is an increase in the number of inbound friend requests from people that fall outside of a users inner social circle. There is considerable social pressure to accept these friend requests, even if doing so ruins the intimacy of the network. Path gets around this issue by removing this type of search capability.
On Path, you can only have 50 friends:
Path could let users have as many friends as they want, and let them decide how intimate or open they want their experience to be. However, the normal mass-market user is not yet equipped for this type of calculated approach to friending. They have not thought about their social graph like those in the tech industry have, segmenting it in multiple ways and assigning various groups to appropriate levels of online sharing. That’s a concept that we have been working over for the last 2 years, and is a mental construct that is mostly foreign to them, at least in the online sense.
Normal users will not carefully preen their friend list. Instead, they will accept everyone they feel socially obligated to accept, and the service will ceases to feel intimate. The 50-person limit makes each additional friend mean something. This constraint gives it value, and makes the user think for a moment before adding someone new. It gently leads the user to the understanding that not every person you know should be your ‘friend’ on every service.
On Path, users can’t share photos on Twitter and Facebook:
Of all the social media fallacies this is the biggest one. Normal people do not NEED the ability share things from one app to Twitter and Facebook. It does not address a real pain point. The feature is added because it’s a good marketing channel for the company, and not because it provides a better user experience.
Great software puts user experience first, and the proliferation of Share This buttons isn’t part of a good user experience. They are confusing, error prone, and they clutter up the UI with something that is usually unrelated to the purpose of the app.
When I bring this up I’m always told , “you can’t possibly scale a user base without viral components like this”. That’s sort of true.
When an app achieves quick adoption numbers, those users are all tech early adopters. They are people who track this industry for fun and jump on a new hot service to test it out. There is little evidence that capturing that group will translate into mainstream adoption. I would be willing to say that because an app is designed to appeal to tech adopters, it won’t achieve mainstream adoption.
Why? Why can’t we just add the features the tech crowd expects and let the mass market ignore them? That’s not the way the mass market works and that’s not how you build great software. When a normal user sees something they don’t understand they stay away from it. They don’t just use parts of a service, they use the entire thing because it makes sense, or they back off because something is confusing and it scares them off. They don’t first understand a service and then figure out how to hack it to make it work for them. They use it for the base case or not at all.
Path has recognized this and built a product that will make the mass market feel at home, even if it means taking a little longer to build an audience. I give a lot of credit to Dave Morin and his team.
Course Catalog: Masters Degree in Internet Entrepreneurship
Every year I set out searching for a graduate degree suited to my career in the Internet industry. I am looking for a combination of computer science classes in web development, design courses that focus on UI, and business courses that teach Internet entrepreneurship.
Disappointed by what universities are offering, I created my own course catalog. It is aimed at entrepreneurial, non-developer, technology professionals that work in the Internet field. There is a strong core of development courses, but they are designed for someone to understand web development as opposed to training students to be developers. I hope to see something like this offered soon.
Please comment if you think a course is missing or disagree with my choices.
Semester 1
Introduction to Programming
An overview of programming that touches on PHP, Python, Ruby, Java, and Objective-C.
Internet Activity Theory and Psychology
What causes users to do the things they do? This will be an in-depth look at the psychology of an Internet user.
Ideation for Web Startups
Students will learn the process of brainstorming and picking apart business ideas. They will learn to spot indicators that an idea will work or not, and how to go about testing a thesis before heavy development begins.
Equity Financing
An in-depth course on equity financing where students and will learn about each step of the fund raising process with mock simulations at each stage.
Semester 2
Pick 1
Development in PHP
Learn the CakePHP framework and in-depth development in PHP.
Development in Python
Learn the Django framework and in-depth development in Python.
Development in Ruby
Learn the Rails framework and in-depth development in Ruby.
Development in Objective-C
Learn the iPhone SDK and in-depth development in Objective-C.
Development in Java
Learn the Android SDK and in-depth development in Java.
Frontend Development in Html5/CSS/Javascript
Students will learn to create frontend interfaces and clickable prototypes.
User Experience and User Interface Design
Students will learn the fundamentals of usability, and how to design interaction and user interfaces.
Business Modeling and Current Events
A case-study driven course will break down successful web companies and their business models. Emerging models will be discussed and students will brainstorm their own. Current events in the tech world will be closely monitored and discussed. STUDENTS WILL NOT BE ASKED TO WRITE A TRADITONAL BUSINESS PLAN.
Semester 3
Launch an App Part 1
Students will work with pairs to develop their own app. In Part 1 users will finish the semester with high-fidelity wireframes, a clickable prototype, and detailed tasks broken down for development. In Part 2 students will begin heavy development.
Scalability
This course will focus on choosing the right set of tools. It will cover languages, hosting environments (Cloud vs Dedicated Hosting), and databases (SQL vs NoSql)
Product Management
In this course students will learn to create a product roadmap. They will learn skills to conduct thorough requirements gathering and user testing. Finally they will learn to break down features into tasks for developers.
Agile Project Management
Students will learn the agile project management methodology and will take part in multiple simulations.
Semester 4
Launch an App Part II
Students will continue their work from Part I and begin development of their application. Professors will be available throughout the process for programming help. Students will end the semester with the launch of their application.
Analytics and Performance Tracking
Students will become experts at setting up, managing, and gaining insight into analytics.
Startup Operations
Co-founders, hiring, compensation plans, benefits, management skills, company culture, and office space are all issues that entrepreneurs need to deal with. While these are common to most businesses, startup operations requires a unique touch to create fast moving and innovative environments for your employees.
Internet Marketing and PR
Students will learn to conduct marketing and PR for their startup. SEO, SEM, ad-buys, blog PR, and traditional media PR will be covered. Marketing through your website, building a brand, community management and customer service will also be part of this course.
The Savior of Publishing is LexisNexis, Not Apple
There is a lot of talk about how the iPad will be the savior of magazine publishing. The thought is that the iPad’s use as an eReader, combined with its accompanying content store, will revitalize the fading periodical industry. The implicit strategy is to get people to pay for online content. If periodicals can convince readers to buy subscriptions on the iPad, they can also require similar subscriptions on their website.
The music industry placed similar hopes in the hands of Apple with the iTunes store. It didn’t work out for them and it’s not going to work out for print. Instead of placing their hopes in a consumer electronics company, they need to look to a company that figured out the publishing industry’s business model years ago; LexisNexis.
Asking someone to decide between an online subscription to the New York Times and the Washington Post is an absurd choice. Years ago all news was pushed to readers by a single newspaper. People didn’t need to read about the same story from two different papers, nor did they have the time. With the Internet, readers are pushed news by many sources (Twitter, Facebook, feed-reader, email), and they pull news from search engines and browsing. Given these various channels, choosing a content source to subscribe to becomes impossible. At any given moment a person can be sent an article from thousands of publications. Without prior knowledge of where they will receive their content from, how can they decide which publication they should subscribe to?
What happens when a story breaks in real-time on the Washington Post, but I subscribe to the New York Times? What happens when someone shares an article with me on a publication that I don’t subscribe to? What happens when I do a search for a topic and the top result is for a magazine I don’t pay to access? These are all common use cases and in each, the concept of paying for a single source of content breaks down. The only logical way to move forward is to charge people for a better quality experience than the one they are currently comfortable with. I’ve said this before; people are willing to pay for content, but it has to be instant, unlimited, comprehensive, and organized.
For the periodical industry, this means one-fee to access to all content across magazines and newspapers. LexisNexis has been offering this to libraries for years and now it’s time to bring that service to consumers. The library is charged a single fee to access the digital version of thousands of publications. Doesn’t that make more sense for everyone?
Apple will eventually offer this for both publishing and music, but nothing is stopping these industries from acting now. Maybe LexisNexis will step up to be publishing’s killer app.
The Value of a Captured Imagination
When I was traveling around Germany I visited Neuschwanstein. The whimsical castle was never finished because its patron, King Ludwig the II, was declared insane. The enormously expensive construction was halted in 1886. Walt Disney went on to model his castle after this amazing building.
This story reminds me to never underestimate the value of capturing someone’s imagination. The people of Ludwig’s time thought he was out of his mind to spend money on this castle, much like people think that it’s crazy for VCs to invest in startups with no business model. The next Walt Disney is out there, and she will turn that captured imagination into a fortune.
