Well, today is my first day as a full-time employee of my own company! Sure, I have no salary, no funding, no infrastructure, no office, and am incredibly anxious, but at least I’m doing it!
It’s been something I’ve wanted to do for years, and finally, I’m going all in. This past Friday was my last day at my previous (and hopefully final) consulting gig, and now the only boss is ME – and my wife… 😉
So, after MUCH encouragement and prodding from my lovely, supportive wife, a lot of “that’s a great idea” from friends, and sideline co-founder support from buddy, I’m going all-in and starting my own business! Today, Monday, March 7, 2011, is day one!
I’d love to tell you all about right here, but I’ve always been jealous of the secrecy surrounding those so-called “stealth” start-ups. (I mean, really, why can’t I know? Why am I not allowed in your group? Is this junior high?) So, for a little while, it’ll be stealth – at least until we find a name for it…
What I can tell you is that it’s going to be an app-based business – and let me coin that phrase right here, right now. It’s like an online or e-commerce business, but the “online” component will be replaced by mobile apps. So, while you may think of it as just a mobile app, it’s not. It’s a business that’s facilitated by mobile apps. Sure, there will be a web component, but only for support and data entry and complex activities. The key to the idea is marketing, and that’s what I love. There’s a marketing challenge, and hopefully, this is the solution.
I can also tell you that the idea sprouted about a year ago, but has really taken hold since we’ve moved to Hawaii, where the $12 billion tourism industry is about 25% of the total economy. This is a great year to start a tourism-related business in Hawaii, since visitor spending is already up 20% this year after the worst drop in economic activity since Hawaii became a state. I’d love to tell you more, but my boss is a real jerk and I must get back to work…
Stay tuned, and hopefully this is the start of something BIG!
I recently had the opportunity to consult with a local startup around their plans for pricing their cloud-based home health monitoring application. They have an amazing product and great early traction with beta customers, and are now at the point of thinking about pricing as they sell direct and through partners, adding two dimensions to their pricing equation. Adding another dimension is their incorporation of add-on services, and how to pass along those fees while also adding a markup – for both themselves and their partners.
As is usually the case, once they started thinking about their pricing strategy and all of the associated touchpoints, the problem quickly expanded beyond “what do we charge the customer?” to “wow, there’s a lot we didn’t consider!”
Who’s Important? The Customer!
There are a few ways to go about pricing for a cloud-based app, but generally it’s about getting down to the perceived value and making the pricing model match your customers’ or partners’ mindset. If you try to price based on your needs or benefit, you might end up confusing the customers. If they match, that’s rare but fantastic. Always remember that your customers will evaluate your pricing based upon their perspective, not yours.
It’s also important to understand what your customers are using for their perceived model when evaluating your pricing. If you’re selling cars, they expect to see a sticker price and to pay much less than the number they see. If you’re selling mobile apps, they expect it to either be free or close to 99 cents, and they further expect updates to occur frequently. Why? Because that’s how mobile apps are generally offered, and that has become the accepted “model.”
Consider the typical legacy pricing model of days gone by, where you paid a large, up-front fee for the software and any required hardware, then paid additional fees based on number of locations or users. There may even have been recurring fees for add-on services. This model was mostly in favor of the seller, but became the de facto pricing model for both consumer and enterprise software applications.
Enter “the cloud,” where hardware fees disappear and the service becomes more akin to a utility than a product, and where the SaaS trailblazers, like Salesforce.com, set the stage for per-user and ala carte functionality-based subscription pricing. For better or worse, this is now the standard model for pricing cloud-based applications, either enterprise or consumer. It’s not a product, it’s a service. And, it’s not an outright purchase, it’s a recurring utility where I pay for what I use and can turn it off when I no longer need it. Furthermore, especially on the consumer side, people are becoming more and more comfortable with subscription pricing for apps like cloud-based backup, photo storage services, VoIP, and others.
The greatest area where the cloud has turned software pricing on its head is transparency. Skype, Salesforce.com, GoToMeeting, Mozy and other sites tell you up front exactly what their services cost. There’s no dickering, no slimy negotiations with tacky sales reps, and no queasy feeling after you commit that you’ve somehow paid more than the next person. If there’s anything to take away, it’s that your pricing should be front and center on your website! Tell everyone what they get, why it’s amazing, and how much it will cost. Add a few tiers to make it easier to understand.
So what’s the bottom line here? I’m not sure. I know that I want software and apps to be priced based on my perception of value, and that I’m willing to pay a fair price. I naively assume that most people think the same way. I’m willing to pay a subscription for something that I use on a regular basis, but I’m also willing to accept less usability for a lower price (or better yet, free). In the end, I just want a good product at a fair price. Is that too much to ask? 😉
OK, “dead” may be a bit premature, but it is surely in decline. And, unless you are Oracle, SAP, HP, or similar, you’re not a software company, you’re just a feature awaiting a lingering death or a future acquisition.
There is a nice paper by a group at MIT’s Sloan School of Business that covers this industry’s decline in great detail, and shows how software companies have grown more and more dependent on services revenue for growth while license sales (as a % of total revenue) have steadily declined since the late ’90s.
The Feature as a Business Model
While the software world is stampeding towards an app-based economy on the consumer side (more on that in a future post), today’s enterprise software start-ups can succeed in only one way – by building their business on a killer feature missing from the entrenched leaders’ solutions (read: Oracle, IBM, SAP, Microsoft, Google, etc.), then hope that they are acquired by one of those leaders. If a start-up’s key functionality or value prop is matched or trumped by a market leader, that start-up is done.
There are dozens (if not hundreds) of these doomed start-ups in Silicon Valley, scrounging up a few million (<50) dollars in annual revenue (with cash-flow positive always just three quarters away), churning through employees and executives every few years, and living on VC money until, around year six or seven, they either put themselves up for sale at a fraction of the invested capital or they simply close their doors. Hell, I’ve worked for a few of those, and most of my friends in Silicon Valley have been jumping between similar companies for most of their tech careers as well.
On one hand, we should thank the Googles and the Siebels and the rest of the successful Valley companies for creating the wealth to fund the traditional VCs, who then make the Silicon Valley economy possible at all. Since there is so much money available for investment, there are thousands of jobs created just to spend that money, even with incredibly flimsy business models to back them up (OH: “$3M revenue this year, $12M next? That’s impossible and insane, but it’s what the VCs want to hear…”). But I don’t want this to turn into a rant any more than it already has.
The enterprise software industry is dead. The big guys own the market and are essentially the software equivalent of General Motors and Ford. The start-up pitch of “we’re going to disrupt/be the next gen/be version 2.0 of <insert successful software here>” or “we’re going after the $50 billion enterprise <insert solution here> market” is nearly impossible to achieve.
For those of us who work at enterprise-focused start-ups, it makes the effort of the entire team that much more important. There is zero room for slackers or 9-to5ers. The term “start-up” needs to return to it’s meaning as the description of a lifestyle, not it’s current meaning of a small company that provides snacks and foosball to employees.
I’ve been playing around with Stickybits, a new app-based solution that connects a barcode scanning app for your phone with the ability to generate unique barcodes and attach “bits” (comments, URLs, etc.) that appear when the barcode is scanned. As a marketer, I immediately started thinking of ways to utilize this to expand my company’s presence, awareness, and ability to put content into the hands of our prospects. I also thought that – as Stickybits promotes on their website – this would be a fantastic addition to a business card. But once I really drilled down into applying Stickybits as a marketer, things started to unravel.
Stickybits was a big hit at this year’s SXSW and has gotten wide coverage from CNET, ReadWriteWeb and others, but the general vibe seems to be, “What will people do with this?” And therein lies the crux of Stickybits’ challenge: there are some great ideas beginning to surface, but the execution is still a few versions from solid.
Marketing with Stickybits
For B2B marketing, I immediately thought that this would be a great solution for trade shows and events, where fewer and fewer attendees actually want to add another set of vendor collateral to their already schwag-heavy logo’d backpack. More often than not, I’m hearing booth visitors ask, “Can you just email me something?”
Now, if we had a big Stickybits barcode that they could just scan and have it pop-up a YouTube video of a product demonstration or PDF collateral or link to our website, that would rock. But since the barcodes only work with the Stickybits app, the scenario would likely play out like this:
Convince a stranger to add this new Stickybits app to their phone – an app that your company didn’t create and that is essentially bloatware as far as the stranger is concerned.
Wait while they downloaded and installed it, hoping that the connection in the event hall was strong enough for a speedy download.
Explain to them how to use the app, and essentially become a salesperson for Stickybits for a few minutes.
Finally, walk them through getting a snapshot of the barcode quickly, and then explain how they can access your marketing materials within Stickybits.
Let’s assume that you could get past these initial steps, maybe make it fun for people to download the app and not take more than a few minutes of their precious time. This is where Stickybits really falls down from a usage perspective: the “bits,” as they refer to the notes attached to a barcode, don’t really pop anything up. The app just lists the links as text, requiring the user to scroll through and click on the link they want to see. While this isn’t that big of a deal, it is another step and does dramatically limit the “awesome” factor of the experience. The bits are formatted much like comments to a blog, so there’s not really any formatting or categorization. And currently, anyone can attach new bits to the barcode, which totally limits, if not outright eliminates, its usage for corporate marketing. (Imagine a competitor scanning your barcode then adding their collateral as well…or something worse. Yes, as the barcode owner, you can delete bits, but you need to do it proactively.) The final drawback in this scenario is that your links appear on your prospect’s phone, with no obvious way to forward them to an email address for viewing on a bigger screen, passing on to colleagues, or printing.
A major hurdle here is the need for the Stickybits app specifically, not just any barcode scanning app. On my Android phone, I now have four barcode scanning apps, including Stickybits. Yes, that’s probably a bit excessive but I’m assuming that a good number of people already have at least one, and it would be nice to facilitate that whole process by eliminating the need to download another app just for this one-time scan. But then again, that’s how Stickybits will become pervasive.
Despite these drawbacks, the potential here is enormous. Adding a barcode to collateral that drives prospects to a microsite, a special promotion, or a related video would be useful. A barcode on your event schwag would turn your stress ball into an instant, persistent data sheet. Barcodes on event badges would be a great idea too, letting attendees scan each other for business card information and whatever else each attendee wanted to attach to their badge.
In addition to corporate marketing, it would be great for a museum to add additional content to each exhibited item, or for a tourism bureau to add backgrounds, photos, and maps to a point-of-interest (wouldn’t it be great to know the details behind a historic building as you snapped the Stickybit attached to the cornerstone plaque?). It would also be neat as the basis for a self-guided tour, where each barcode gives you info on your current location as well as directions to your next stop on the tour. Think of the cool tie-ins with augmented reality apps showing what’s around you or what used to be there (say you’re standing at San Francisco’s city hall and you could see photos from the aftermath of the 1906 earthquake). There could even be links to relevant maps, audio, video, and upcoming events.
My Two Cents on Stickybits…
The challenge that I had, and that I’m sure a lot of visitors to stickybits.com have is, “What do I do with it?” Yes, there are some initial ideas, like the business card or the greeting card, but the execution does not yet live up to the promise. Reading their forums, it looks like a lot of my concerns are shared by others, and that Stickybits is taking note and promising to address some of them.
In the meantime, I’ll be using the few barcodes that I’ve downloaded, and I’ll be keeping an eye on the Stickybits solution as they advance the capabilities. It truly does have a ton of potential, and I can’t wait for their next few iterations to add things like branding (which they already allow for product UPC codes), more interactive bits with embedded videos and document viewers, and hopefully the ability to scan Stickybits’ barcodes with other scanning apps.
As an aside, Stickybits’ has an opportunity to improve their website navigation and really get people excited much more quickly. It took me a lot of random clicking to figure out how to get off of their homepage, but once beyond that, the sidebar menu was very intuitive. I’m assuming that the average prospect will be unsure how or why to use Stickybits initially, and their website doesn’t do much to help ease the process or make it seem obvious. I would bring the “few examples” above the fold, or better yet, incorporate those into the three steps in the thought bubble. I would also bring their site navigation out to the homepage. Yes, I’m sure they purposely limit the links to ones that prompt visitors to download their app – more downloads equal more potential users – but even that’s not intuitive (you have to click on the “Get the app” guy).
Bottom line: it’s a killer idea that’s just about six months away from being a killer marketing solution.