didn’t focus on learning & failing fast until it was too late

I love how they stated it as not just learning but failing fast too. We all learn from failures and knowing what clients don’t like is just as helpful as what they do.

made compromises in early hiring decisions – choose expediency over talent/competency

You always hear how your first hires are the ones that matter most. What position are you hiring for, how do they fit the team and culture you want to build, where do you see them growing as the company quickly grows?

Anyhow, I appreciate the founders of EventVue posting what they did. It’s hard to let your startup go and harder still to admit what you did wrong. I’m sure in the future those that they’ll go on to start up new ventures that go further.

I suppose I’m in the Newbie category heading toward the Maven category. I still haven’t found my exact niche for Twitter yet, but do like following others on it.

There Is No Page Fold via Signal vs Noise.

Not too long ago a coworker pointed me toward an article I wish I could find stating that the concept of “Above the Fold” was a moot point. That since users were now familiar with a scroll bar trying to push everything above the fold doesn’t matter for web design. I hope this continues to take off.

Startup Therapy: 10 Question to Ask Yourself Every Month by Jason on A Start Bear

These are great questions that every startup should be asking. To go with #2 and #3 I’d toss in “Why would someone go with somebody else?”. I think it’s good to look at who else is in the business you’re in and honestly ask yourself if you could do business with you or somebody else, what would make you pick them over you. If you’re really honest with yourself #3 would probably highlight this.

Customer Service Rep: Did you find everything sir?

Me: Yes thank you.

Customer Service Rep: Would you like a gift receipt?

Me: No that’s not necessary.

Customer Service Rep: Are you a member of “some sort of kid clothing shopping program”?

Me: No, no thanks.

Customer Service Rep: Would you like to signup for a Sears Mastercard?

Me: No.

Customer Service Rep: If approved you could receive $15 off this purchase. Are you sure?

Me: No thanks.

All of these questions came before my item was scanned into the register. Once my item was scanned:

Customer Service Rep: Would you like to donate a dollar to Home Town Hero’s?

Me: No thanks.

Then, with my transaction now complete I was then asked:

Customer Service Rep: Would you like your receipt with your on in the bag?

Me: The bag is fine.

Customer Service Rep: Okay, also on the receipt is a web site I’m highlighting. It’s for a customer satisfaction survey about this transaction. If you do the survey you could win a $4,000 gift card.

The $4,000 was also highlighted.

Walking away from the register I stopped and made a note in my phone about playing 20 questions with the cashier. It occurred to me that in that deluge of questions were missed opportunities and over used opportunities.

Overused Opportunity 1 – Detract from the Sales Experience

The biggest over used opportunity to me is how many times do I have to say no to the in store credit card? I’m sure somewhere is a spreadsheet within Sears corporate management, or perhaps at Mastercard headquarters, that shows if you keep asking you will get 1 in 1,000 gullible customers to signup for the horrible deal they’re trying to sell. All to save $15 or to get some horrible piece of tchotchke. By getting the 1 in 1,000 customers they annoy 999 other customers asking the same question over and over.

Overused Opportunity 2 – Depersonalize the Sales Experience

Did I find everything? Yes, sometimes this question is helpful, but generally it feels like they are trying to maximize my purchase for them and not me. What happened to, “Hi, how has your day been?” or “What a lovely beard you’re growing sir!”. Well maybe not a comment about my new beard, but anything to make it not seem like yet another way for them to maximize the money coming out of my wallet.

Overused Opportunity 3 – Securing My Loyalty

Loyalty programs. I’m for them and against them. I like saving money, but often I don’t like the hassle. And sometimes they’re just poorly veiled attempts to garner more information out of me.

All of these overused opportunities simply lead to information overload and the customer checking out from the conversation while they simply try to purchase the goods YOU ALREADY SOLD THEM.

Overused Opportunity 5 – Trying to Sell Yet More “Stuff”, When You Already Sold Them Some!

Really, that’s what much of the above boils down to. And what is the cost of this?

Missed Opportunities

In the middle of the transaction what a quick blurb asking me if I would like to donate a dollar to Hometown Hero’s. I did a quick look around when the cashier asked this question. I didn’t see a single sign about what the program was, nor was I offered even a quick blurb about what it is. Later, further in the mall I saw a big sign about it and thought, gee, that’s a nice idea. In the cashiers defense the name is pretty descriptive.

But by this point I had been asked a bunch of questions with one of them being my biggest pet peeve (the credit card). I had checked out from the transaction, the only brain cells I was willing to put into the deal at this point were to make sure I was being charged correctly.

They missed the opportunity for me to care about my transaction. And that can be dangerous.

Are You Overusing Opportunities?

It’s often tempting to attempt to get as much information from a captive audience as you can. When they’re actually giving you money you know they’re interested in something you offer. Since they’re interested perhaps they’ll be interested in something else, that’s an opportunity to up sell. Or perhaps you’re desperately in need of information about some other area of your business, you can ask them then too!

But should you?

No. And especially no with online sales. The ability to mentally check out of a transaction online, or even stop the purchase altogether, is even easier than in the store. And in today’s information age, where when you call customer service and you’re always selected to answer a customer satisfaction survey, simply being happy that someone wants to exchange money for your services might be asking enough.

Because in the end, if your customer is happy there will be other opportunities. Opportunities you can make use of, but not overuse, and not cheapen your customers sales experience.

Ultimately we chose to roll out a Facebook app using Silverlight. Nice combo right? I’ll probably talk about that later, but the real focus of this article is about what happens after you do step “A. Make the Gizmo”, skip past part “B. ???” and onto “C. Profit!”.

How much can you “expect” to make with a Facebook app?

Well if you read the news on Bloomberg that Zynga could be valued over $1 billion then this is just a stupid question because you’re going to make a lot of money. Well if ethics are not a problem. Of course there is also the valid point that not everyone is a Microsoft, Google, Apple, or *cough* Zynga. There are a lot of happy Joe’s in the middle between $0 and $1 billion. If you’re a happy Joe with the potential to be something great, then again I ask, how much can you “expect” to make with a Facebook app?

With that question in mind I was pointed to an interesting article on Mashable asking a similiar question about how much Facebook apps are making. Which led to an even more interesting article which estimated the value of a Facebook application user.

The article suggested back in January 2008 that such a user was worth $1.40 (using a 5x valuation). It’s actually an interesting way to go about answering the question. Find a company that is publicly traded that pretty much does nothing but make Facebook apps. Turns out Snap Interactive, Inc.is exactly what you’re looking for. Its a publicly traded company, thus it is required to produce SEC filings which are packed with a lot of information.

In January of 2008 it was surmised a Facebook user install was worth $1.40.

The article goes on to calculate the value of a Facebook application user by looking at Snap, how much it made in a quarter and how many Facebook user installs they have and seeing how much revenue each install brought in. It found that over a year the actual worth is a whopping 28 cents. That’s $388,000 in quarterly revenue / 5.5 million user installs * 4 quarters. Yup, 28 cents. That’s not a lot of money, but with 5,500,000 users it scales just nicely.

But that was almost two years ago you say! Well I said that.

So off to Yahoo! Finance I went and delved into Snap’s SEC recent filings. What I found was interesting.

1. Facebook installs are worth less then they used to be.

2. SEC Filings are boring.

But even boring material can be fun to decode. In November of 2009’s quarterly SEC filings Snap stated it has now delved into iPhone apps and a paid apps as well. So it is no longer trying to live on “freevertised” app only. But reading between the lines I don’t think these accounted to much of their profits. So with that out of the way Snap has grown its Facebook install base to over 18,000,000. That’s almost a 328% increase in less than 2 years. Good for them.

While their quarterly profits have dropped since the last quarter in 2008 they have remained stable for all of 2009 with an uptick in this last quarter.

For the last four quarters that’s an average of $860,250 / quarter.

Using the same calculation that makes a Facebook user install worth: $860,250 in quarterly revenue / 18 million user installs * 4 quarters = $0.19 / year. Only 68% of their previous worth.

Using a 3 to 4x valuation, which is what EA used for buying Playfish, that makes the current worth of a Facebook user install $0.57 to $0.76. That is half to a third of what it was at two years ago.

Facebook user installs two years later may be worth only $0.57 to $0.76.

There are many possible reasons why the value apparently has dropped. First off, this is using data from only one company. Second, perhaps Snap’s apps are stale, after all we are talking installs not active users. Third, maybe Snap has a lousy ad deal. Either way 18,000,000 installs means they’ve done something right at one point or another. Fourth, ad revenue is simply down because of the recession. The list of possibilities goes on.

Personally, I am not expecting to make a truck load of money with our Facebook app; I’ll settle for a nice spoon of money and a lot of experience thank you. Clearly when you look around the many apps on Facebook it is apparent Snap and Zynga (and it’s ilk) are the exception. While my cohorts and I are going to put our best foot forward with our app, we have no glamorous visions, we’re in this as much for the experience as anything else.

And at $0.57 per user I think most Facebook apps developers are more in for the experience rather than the glamorous lifestyle ahead of them.

Well another site based on it has popped up and I’m quite happy to see that it is about entrepreneurship, called OnStartups Answers. I can’t wait to see how this does.

If you’re not familiar with the Long Tail Theory it is a theory that selling small volumes of niche items can bring in significant revenue. This seems particularly true in the digital realm, where the cost to store digital files on servers is considerably cheaper than storing physical objects in a warehouse. The term Long Tail is a result of the graph of inventory and sales (seen left). Where the yellow section is the niche items and results in healthy revenues.

The papers findings appear to echo a lot of academia’s thoughts on the Long Tail. That it is a good theory, and one that has been around for a while, but it does not work out the best when you have to account for physical storage and delivery. I see where they are coming from with this, but I’ll leave this up to the academics to debate.

Since I read this article what has kept coming to me is the question, “What are the negative affects of a business seeking out to maximize revenue by implementing the Long Tail?” In fact, what got me thinking about this is the very Netflix data that the paper and Chris reference.

Netflix has been adding more and more movies to its collection for quite some time. Everyday more and more obscure movies, TV shows and self help videos are added. Thousands more than the 3,000 videos Blockbuster puts in its stores. According to the Long Tail theory, the abundance of niche films, documentaries, kids shows, foreign films, snooty French films, and cult classics will create quite a revenue stream for Netflix. Furthermore, it may even decrease demand for mega-pictures. Thus, Netflix can purchase fewer of the hot new releases, because theoretically their customer base will be viewing the niche films more often. It’s a win-win for Netflix and their customers.

This would appear not to be the case once you take into account Netflix Throttling. When first introduced, throttling of your Netflix queue meant Netflix would simply skip the movies at the top of your queue that were currently on everyone’s queue. Instead favoring customers who had received fewer films this month. As this process was refined Netflix finally let you know you were being throttled by telling you movies in your queue had a “Very Long Wait”, “Long Wait”, or a “Short Wait”.

Thus, customers who used the service to the maximum were punished. And customers who paid the same amount but viewed fewer movies each month were rewarded. The business principle here is obvious, the customers who do not view many movies per month cost less to keep. While the customers who view what Netflix deems as “heavy users” cost more per month due to shipping costs.

If a heavy user is upset about this, well Netflix does have over 100,000 movies in their collection, why don’t you choose one of those? Effectively, Netflix has artificially forced its customer base down the Long Tail, rather than customers naturally gravitating towards it. In other words Netflix has a “Forced Long Tail”.

In fact, since the addition of throttling Netflix has even made it harder to even find the newest releases. The new release page commonly shows movies that have been available on Netflix for months. In fact in the New Releases section right now is Mall Cop, a movie that was released to DVD in May, five months ago. This in fact is not the worst offender I see; Madagascar 2 was released exactly nine months ago and is in the New Releases section. This section once truly held new releases, movies that have been out in the past few weeks and even told their customers what movies were coming soon. This is another case of how Netflix is pushing its customer base down the Long Tail.

Is the practice of pushing your customers down the Long Tail in fact a bad practice? Or is it simply a way to expose customers to other movies other than the top hits, in fact a band-aid approach to poor movie suggestion technology?

The positive effect of pushing your customers down the Long Tail of course is to your bottom line. You can purchase fewer mega-hits, potentially increase revenue from niche titles and possible add more customers seeking the niche titles. But at the expense of what?

Customer satisfaction.

The negative effect of this practice is obvious, those customers who love the service the most are instead punished for it, in fact upping your plan to a higher paying, more movies out at a time, plan appears to have no affect on throttling. You pay more, but are still throttled.

The take away here is of course there is always a downside to an upside. The Long Tail may in fact increase revenue as customers explore increased availability to niche products. But at some point businesses may feel that the margins on these niche products are too low and force their customers down the Long Tail at the expense of perhaps customer satisfaction.

But then, the airlines industry has been sacrificing customer satisfaction for years and it’s just doing fine. Right?