Data Addict

I graduated from Oberlin College in 2008. As liberal arts colleges go, Oberlin is considered very liberal and very wealthy. As a kid raised in a poor, middle-of-nowhere Ohio town, Oberlin was like living on the moon.

Although I was inundated with the language of liberal arts studies [1], I didn’t notice how much it had reduced my ability to communicate until a little more than a year after I had graduated. At a meal with my best friends from college, we took turns indulging in nostalgia and particularly in the rhetoric that demarcated that part of my life from the others. My friend Trina did a rousing impression of a girl in a gender and women’s studies class that had been particularly memorable:

“I feel like … you know … like women are these targets for societal redefinition and symbolism, it’s like men see us as somehow being, like, these representations and symbols of a quasi paternalistic rebellion.”

Having heard hundreds of such wishy-washy statements [2], what struck me the most was the first three words: “I feel like.” I hadn’t noticed, but Oberlin had trained me to replace “think” with the phrase “feel like” in my speech patterns. So instead of saying “I think HTML5 is going to replace Flash,” I now say “I feel like HTML5 is going to replace Flash.”

This is not a harmless alteration. As Trina pointed out, the reason people use that pattern of speech is to make ourselves immune to criticism. As Trina succinctly put it: “it’s not socially acceptable to criticize a feeling.” Since having that discussion, I’ve noticed this pattern of speech everywhere. I hear it most in situations where the speaker is unwilling to stand behind what they have said.

I don’t want to sound insensitive here, it’s no wonder that people would want to avoid being criticized, especially about tentative beliefs. During a discussion group, for instance, you may say something that only just came to you, and especially for a shy person, being criticized for such a statement could feel overly harsh.

I think, however, that it is an insidious and evasive speech pattern that reduces the opportunity for legitimate disagreement and constructive criticism. Disagreement shouldn’t be avoided, it should be sought, because it is only through disagreement and iteration that success can be obtained. I’m not just speaking about literature discussion groups [3]; any difficult and long term endeavor requires frequent and honest criticism to reach a successful conclusion.

It’s not novel to criticize the negative impact of college educations on student writing ability, but this seems like a particularly bad habit that is easy to fix. Trina was right: you can’t criticize a feeling, and couching statements and arguments as feelings is bad for everyone.

[1] Before switching to Economics in sophomore year, I was a film major and read stuff like this all the time: “Bergman’s entire film is, then, concerned with transcendence, with a transcendence of languages and of the grammar of film, of the traditional perception of the film spectator as passive recipient, of the medium conventional reliance on narrative as its formative principle, and of the historical Western concept of art as wholeness and order.”

[2] I think the cout de grais in proving how wishy washy liberal arts academic writing is comes from the Sokal affair.

[3] The idea of a “success” in a literature discussion group is slippery, but I am referring here to my startup, which would not have succeeded if not for the criticisms that hundreds of people (myself included) leveled at our idea and implementation.

Back when I was in 9th grade, I purchased my first desktop computer. I did extra chores, mowed lawns, and shoveled snow to afford my dream machine. It came tricked out with a 900Mhz AMD Athlon Thunderbird CPU, 128MB of RAM, a GeForce 2 GPU, and a Plexdor CD burner. Housed in a bleak grey metal box, it was my pride and joy. Countless hours of Counter Strike, Total Annihilation, and Starcraft were played on that computer.

Despite my fond memories of that first computer, it was never the perfect performance machine. I had made many compromises to meet my meager budget, and the hardware was out of date less than 60 days after it arrived. So around that time, I vowed that someday I would buy myself the most ridiculous performance-intensive machine that could be had.

Fast forward quite a few years and I finally have the cash to buy that no-holds-barred gaming machine. But desktop computers are no longer terribly practical. And I don’t play Counter Strike in the evenings anymore. And my middling laptop runs the Adobe Creative Suite just fine. In fact, I spend most of my time in front of productivity and office applications at my startup, and in the evenings, I try to spend time away from the computer for the sake of variety. I have the cash, but I longer want that beast computer, and it’s sad. When I explained my disappointment to a friend over lunch, he shrugged and said, “of course you wanted that computer, but dreams expire.”

He was right. Since making my vow to buy an uber gaming machine, the dream had lost meaning for me, and like a mesofact, I had not updated my list of dreams.

This caused me to not only go through that list, but to re-evaluate how I pursue and value dreams. I have kept a bucket list for several years, but I here propose a short list of reasons why you shouldn’t have one. In short, maybe you shouldn’t follow your dreams.

1) Destinations are boring.

As a society, we praise big dreams and tell kids to aspire to be astronauts. But as a society, we focus our dreams on destinations, not on the journeys that make them meaningful. I fell prey to this exact problem when we were founding our startup. I wanted to build a successful startup. For three years, we worked hard, we got some lucky breaks, and now Skritter is successful. I have become an astronaut. And you know what? It’s an empty victory, because as it turns out, what I really want is not to have a successful startup. What I want is to work hard on difficult problems with people I like. Notice the difference there: the first dream is a state, “success,” the second dream is a process “work hard.”

For all the glib discussion of life being a journey, not a destination, we overlook that fact when forming our deepest and most personal goals. Maybe you want to be a famous rapper, a skydiving instructor, or a race car driver. All of these are noble ambitions, but thinking about those dreams in terms of continuing actions rather than destinations makes them more meaningful. You don’t want to be a rapper, you want to spend most of your time rapping in a studio. You don’t want to be a skydiving instructor, you want to teach newbies how to enjoy their first jump. You don’t want to be a race car driver, you want to drive fast cars on a racetrack.

Destinations are boring, and dreams that rely on them are hollow.

2) The exotic is kinda meh.

You know what sounds cool? Getting out of a Cleveland winter and working from Costa Rica for 2.5 months. The problem is that if you value a degree of consistency, recurring familial interaction, predictable diets, stable electricity and internet, reliable transportation, and a hundred other factors you probably take for granted, then it’s actually not that cool. That was the story of my 2 months in Costa Rica.

Yet despite the disconnect, whenever I tell people about going to Costa Rica, most people said “I wish I could do that.”

Daily life constrains choice sets to the degree that most people can’t up and move to Costa Rica for 2.5 months. And for most people, that’s a good thing. Dreams often take the form of overcoming the inertial forces that keep us grounded to the status quo. But it is precisely these forces that often make us happy. So in effect, many dreams are predicated on circumstances that by their very nature would make us unhappy.

3) Dreams made in a vacuum are meaningless.

I drive an extremely economical car and I’ve always dreamed of having a performance sports car. Recently I got the chance to test drive some exceptionally cool sports cars, and coming back to my little Suzuki Aerio was a relief. Why, you might ask, would I prefer my 1600cc putsy hatchback to a Mercedes Benz E55? I won’t go into details, but in forming my dream about owning a sports car, I ignored all of my previous preferences. A Porsche looked cool, but in my daily life I prefer gas economy, reliability, and low insurance bills.

Dreamers are encouraged to think big, and that often implies “outside of our experience.” This gets back to something Paul Graham suggests about finding what you love to do: if you aren’t tinkering with computers in your free time, do you really want to be a programmer? If you didn’t sacrifice to buy a sports car when you were 17, are you really invested in performance automobiles?

We often classify our unqualified aspirations as “dreams” and then foolishly work towards them. Daily experience is often a far better judge of what you will enjoy than a groundless idea of what you want inherited by a larger society or peer group.

Summary

All of this might lead you to conclude that I think dreams are meaningless, but that’s not the case. I think dreams are extremely important, but they often grossly misrepresent what people actually want from their life experience. I am still struggling to find a good way to pursue my own dreams and would be interested to hear if anyone else has had luck better forming and achieving meaningful dreams.

At the beginning of 2011, my work schedule was light. I could stop work on the startup early without stressing out, I took longer lunch breaks, and I spent the evenings recreating. I watched a bunch of movies that had been on my list for years, I caught up on correspondences, and I thought about and wrote more blog posts. I went to sleep when I wanted, woke up when the sun rose and generally lived it up. From the outside, I was living the lifestyle business dream, if only temporarily, while other projects wrapped up.

I was, however, deeply unhappy. After the first week or two, I found that watching a lot of movies at once was kind of boring, that I could correspond with others much faster than they could reply, and that it didn’t take long to write all the blog posts I had been planning. But much worse, I discovered that for me, being productive had a large impact on my happiness and I simply wasn’t efficient when I wasn’t busy. Without hard deadlines and time limits, coworkers and customers, it was always acceptable to dally and watch an episode of Community. Or stay up late reading Reddit. Or hit the snooze button more than once.

Just to be clear, I didn’t have motivation problems at first. I found that the less I had to do, the less I had to worry about using my time efficiently, and this led to a rapid decline in productivity. The whole slowdown process took less than 2 weeks.

Starting in the summer, work started picking up again. Even though I was working more than full time, I realized I was accomplishing more on my personal projects than I had when a two hour lunch break was no problem and my days ended at 4PM.

In short, I’ve found that the right kind of productivity (as in, working on projects/work that matters to you personally) tends to increase as you get busier. There is a linear relationship between how much you have to get done in a day and how much work will get done on personal projects.

There’s an old saying that goes “if you want to get a job done, give it a busy person.” This isn’t a new or revolutionary thought, but the inverse is both: “if you want to get a job done yourself, get busier.” I can’t speak for everyone, but I’ve definitely found this to be true.

Have others found this to be true? If so, have you found any hacks that increase productivity even more?

Every morning I read the news highlights in the Wallstreet Journal and for months the news has been nothing but grim. People are without work, families are struggling to feed themselves, and for many people these are dark time. Perhaps worst of all, leading economic indicators show no end in sight.

But for all the bad news, the economy does still exist, and people continue to spend money to solve problems. Last Saturday night my fiancée and I tried to go out for dinner only to find that most of the Yelp-recommended restaurants within 20 miles had a 1-2 hour wait to get in. Similarly, back in September, I got mired in Labor Day shopping traffic for almost an hour around a nearby mall. The economy is tough, but that doesn’t mean you can’t build a viable business.

I would suggest, however, that the current economic climate should inform the sort of product you build. In economics there are two broad categories of goods: normal and inferior. Normal goods are the kind you are probably most familiar with; they are goods whose demand rises with consumer incomes. Cars, smart phones, tailored clothing, and most web services fall into this category. Then there are inferior goods whose demand falls with rising income. Public transportation, landlines, and Wal-Mart clothing might be examples. The idea is simple: every consumer faces a price/quality decision, and as income rises, people tend to favor quality.

During recessions, however, the winning strategy for new businesses turns to inferior products. Groupon is an excellent example of an inferior product which has experienced runaway success [1]. Think about it, if you had more money than you knew what to do with, would it be appealing to restrict your purchasing choices only to what Groupon offered? If you are like most people, you would say “no.”

Put another way, find a way to save people time, money, or both. There are so many people today who are strapped for cash that if you can find a way to save them even a little bit, you have an appealing value add.

This is not to say that normal goods can’t succeed in 2011, just that I look around and see a dearth of compelling inferior goods. [2] So, to those of you looking to start companies in the near future, take a step back and at least consider making something people can proudly call inferior.

[1] I know that the Groupon IPO has been problematic and the coupon giant isn’t what its investor might otherwise like, but a valuation in the billions is still what I would consider a runaway success for a company less than three years old.

[2] While writing this, I couldn’t help but think that younger people in particular have trouble creating inferior goods. I think that there’s a whole blog post in that topic though, so I’ll save that for another day.

It would be hard to find a self-respecting geek and technologist who disagrees with the phrase “the future is mobile.” All the coolest new gadgets are tablets and smartphones, all the biggest plays in content are on those devices, and at least according to Fast Company, the market dominance of the biggest tech companies depends on how you use that device in your pocket or backpack.

So we get it. Mobile is hot. Mobile is irreplaceable. And most importantly, mobile is the future. But this mobile future takes software for granted.

We at Skritter are learning that because we’re building a version of our app for iOS. We have found that there are so many apps that the they have been devalued to the point of monetary irrelevance [1]. That’s sad because a good app is a piece of art. The buttons, the interface, the streamlined backend, all the pieces of a finely-tuned app take so much time and energy to perfect that I wanted to write a post to call attention to the level of software perfection that most people have acclimated to without even knowing it. Here are three reasons why it’s insanely hard to make a kick-ass iPhone app:

1) System Constraints

You could say that Objective C is the problem, or put another way, the lack of >insert language< or >insert framework<. But the reason why developers are shackled to Objective C is to make sure processes finish in human time, and this is fundamentally a performance bottleneck in mobile hardware.

Skritter’s iPhone app is going to be great, but at core it is just an app to learn Chinese characters. Skritter won’t perform facial recognition in real time or allow you to edit movies or do any other mind blowing complex task. But it won’t run on anything less than an iPhone 3GS. Why? Because older phones have limited memory, newer versions of iOS brick the older phones, and news features are only available to developers on newer versions of iOS.

To put this into context, our “graphics” amount to particle effects that make the writing look cool. This isn’t a Hollywood production.

For a generation of coders accustomed to limitless managed memory, high-level programming abstractions, and thousands of deeply functional opensource libraries, mobile is a step back to the Byzantine world of Commodore 64s.

If you have built an app that doesn’t choke on graphics and feels responsive, you have accomplished an incredible challenge and my hat is off to you.

2) No Features

It’s not just that there are fewer pixels on mobile devices. User-software interaction paradigms are changing and simplifying. Photoshop’s submenus, window management, and setting screens afford that software package a level of feature depth I don’t believe can be achieved in a mobile environment no matter how sophisticated and intuitive UI conventions become.

Put another way, there is a terminal threshold of feature depth to an app and this limits the scope and usefulness of any one app. That’s not an intractable problem and the solution that has been embraced to date is app fragmentation. There will be separate Skritter Chinese and Japanese apps for this exact reason. But consider the logical extreme of this design trend: if you were to make Photoshop work on a mobile device, you would end up with several hundred micro-apps to do one thing in a transparent way.

So, if you are attempting to make a kick-ass iPhone app, you must make a lot of decisions that ultimately come down to “how little will my customers allow me to integrate into this thing?” Err on the side of simplicity and you might end up with a fart app. Go the other direction and you have a pile of unusable menus and sliders.

3) Extreme Polish

The app market is cruel, even moreso for the need to do a Hollywood launch. Because nobody has solved the discoverability problem in the app store [2], you need to launch big and magically figure out exactly what users want ahead of time. That last point is especially troublesome for people used to iteratively designing for the web. The road to app store success is littered with the corpses of apps that launched big but hadn’t fine-tuned their interfaces, didn’t have time to include that key feature users wanted, or just failed to make the app novel in some primal way.

Even the basic business sense of not overbuilding is turned on its head for mobile development. If you somehow manage to land that sweet TechCrunch article or New York Times acknowledgment, the app has to be perfect not just from an implementation point of view, but from a feature and context perspective as well. A perfectly implemented, compelling, novel app isn’t enough; you have to know that your customers, in particular, will agree about your choices.

There’s always another app for whatever you are doing, and that makes customers more picky too. The pressure to get it right the first time can be crushing.

So Get Insane and Start Building

I write all this not to discourage, but to uplift all those developers struggling with their mobile projects. It’s tough to make something good, let alone make something good that also happens to make enough money to warrant the effort. For those out there building apps of consequence, I want this to read as a note of enouragement: stick to it and overcome the difficulties I’ve written about above. The mobile future is depending on you.

[1] Don’t believe me? Ask a serious iOS developer how their in-app purchases are doing and you’ll find that the Farmville model of monetization is thriving.

[2] I know you can pay for app circle promotion, but for a small shop, the promotion is either cost prohibitive or low quality. The ecosystem is broken for smaller players.

At Skritter we have been working on our iPhone app for many months. Recently, Scott had the brilliant idea of imitating Minecraft’s Notch and post status updates in real time to keep people psyched and provide a window into the development process. Nick and I thought that was a great idea and Nick setup publish sync to cross-post content from Google+ to both Facebook and Twitter. We had never worked very hard to cultivate followings on any of those platforms, so we started with around 150 followers on Twitter, 345 subscribers to our company’s Facebook page, and 22 Google+ friends. The way publish sync works is we post our content to Google+ first. It is shared with friends and the 22 Skritter users currently on the platform. Our message is then copied to the SkritterHQ Twitter feed and the Skritter Facebook feed. It’s worth noting here that we have spent considerable effort promoting our Twitter feed, but not much promoting our presence on either Google+ or Facebook.

When we first started, we guessed that Twitter would provide us with the most engagement, Facebook (and certainly Google+) were added to this plan primarily because it was easy to do so and we had a presence on those networks already.

After 8 weeks and 59 status updates [1], we have 12 user comments on Google+, 12 responses on Twitter, and 50 user comments on Facebook. Since we didn’t really expect to get any responses on Google+ [2] and we were expecting to receive feedback on Twitter, the results have really challenged our expectations.

Facebook users were not only responding to our posts with more fervor, they were responding to each other and creating lively comment threads that fed the growing buzz around the iPhone app. Even the paltry 12 comments on Google+ produced high value conversations with customers.

I have to check myself here because I’ve never been convinced of Twitter’s value-add and this could be a prime example of confirmation bias. That said, this reminds of a comment that patio11 made almost exactly one year ago. He was responding to the following quote taken from a techcrunch article bemoaning location-based checkin services: “if you’re competing with Facebook in social networking and your name isn’t Twitter or Google, I’m sorry, but I don’t like your chances.“ Patio11′s response: “Twitter has done some amazing Jedi mind tricks to convince the media that it has a place in that sentence.”

Are we doing this wrong, or does the emperor have no clothes?

[1] The goal was to post every day that Nick worked on the app. It turned out that he updated slightly less often.

[2] With an addressable readership that was 1/6 the size of our Twitter following, and based on an experimental social network, we didn’t expect much out of Google’s offering. Additionally, the Google+ account wasn’t a company account, it was just Nick’s personal account, which to our knowledge is only connected to a few die-hard technophiles and Skritter fans.

Back in June I read an interview with Derek Sivers about his CDBaby customer support. I’ve always found his writing educational, but in this interview his closing sentence struck me as particularly true: “customer service is the new marketing.” That got me thinking about my own experience with Skritter and how much we labored to do marketing “right.”

We started Skritter on a shoestring without the explicit intent to run it like a boostrapped business, but that is essentially what it became. We decided that we would either make money and support ourselves, or stop working on the site. After the first year, the site was generating cash, but not very much. Nick, Scott and I decided we needed to hit marketing hard. We partnered with a great guy in China (Doug) to help us reach more customers and we set about our marketing.

We began with Adwords. We attended several relevant trade shows. We tried promotions and giveaways on the site. We started Tweeting and developed a strategy for Facebook content. We had two marketing interns in China talking to learners on the streets of Shanghai. We were present at Chinese testing centers, we contacted schools to sell site licenses, we did webinars, distributed print ads, setup an affiliate program, spent serious time on SEO, created a content strategy to improve SERP results, collected quotes from marketing consultants and agencies, redesigned the appearance of the site, and conducted A/B tests.

Throughout all of this, we continued to grow, but our growth curve didn’t look a hockey stick, it was the gradual upward movement of a well liked company.

We always made it a priority to bake in tracking to our marketing, and after a year with little to show for our effort, we decided to give it a temporary rest.

That week we watched in amazement as the site kept right on growing, despite negligible marketing outlays. We nervously twiddled our thumbs, waiting for the growth numbers to level out and go into free fall, but that never happened. Instead, Skritter continues growing to this day, and we have strong evidence to suggest that it’s because of the way we treat customers.

First, we conducted a poll of our user base and found that more than 35% of our customers had personally been in contact with either Nick, Scott, or I. That meant 1 of every 3 paying customers had traded a personal email or met us face-to-face! Considering the size of the site at the time, that was an astonishing number of customer interactions.

Second, even after months of no marketing, growth continued unabated. Moreover, we continued seeing a trend we hadn’t paid much attention to earlier: people arriving at the site and telling us (albeit not in an easily quantifiable way) that they were there because of referrals. This was corroborated by a forgotten poll we had done more than a year before which attributed most new inbound customers overwhelmingly to referrals.

So, while we were trying our best to find scalable marketing solutions, all those hours spent in front of keyboards being sociable and helpful to current customers drove site growth. Our customer service has been our marketing, which directly supports Derek Sivers’ opinion.

What’s the takeaway here? Simply put, marketing doesn’t always make sense for startups. Where marketing is concerned there are two schools. The first is the “build it and they will come” school of thought. The second is the “most startups needs marketing” school. We clearly followed the latter and although we are just one data point, when I start another company, I’ll take Derek’s advice to heart and disregard marketing, at least at first. When you’ve only got 5 customers, there’s a real temptation to focus all your time and effort on finding more customers. But that’s missing the forest for the trees.

In our experience, the key to a larger customer base is the person right in front of you, money in hand, waiting to see how you’ll treat them.

Spam is a huge problem. But my experience with the Gmail spam filter has been heavenly; it’s been years since I’ve seen spam in my inbox promising to enlarge my manhood with a Rolex.

The big problem today is opt-in email. I have been actively unsubscribing from email lists for more than a month. But newsletters, special updates, coupon offers, and other email marketing still arrive every day in droves. During the last seven days I have received 14 notifications from meetup.com, 6 Google+ friend requests, 3 Facebook event reminders, 2 notifications from job boards, 2 newsletters from services I’ve long since stopped using, 2 survey requests for services I’ve recently used, 1 LinkedIn update, 1 travel advertisement, and 1 airline advertisement. That’s 32 emails in 7 days. I never consciously opted into any of these emails and have tried to unsubscribe myself as best I can.

But increasingly, I see emails sent from large, respectable companies [1] that provide me with no unsubscribe link. Instead there is an insidious trend towards “Managing Preferences,” which invariably requires a log in, a brief search to find the unsubscribe option, and a form submit. And after all that am I unsubscribed? Apparently not because I keep getting messages. The companies assure that I’m off XY email list while seemingly putting me on ZQW list simultaneously. Perhaps most irritating of all, I am spending an increasing amount of time browsing and checking email from my phone, and elaborate unsubscribe workflows thwart my ability to quickly opt out.

As the founder of a web startup myself I do not believe there is anything wrong with emailing customers. I don’t even mind that I’m being opted into email lists by default; it actually makes a lot of sense. We did an A/B test a while back to see whether visitors to our site wanted to subscribe to five introductory tip emails [2]. Interestingly, we found that just putting the option to get email–we phrased the offer several different ways– decreased signups, even though 78% chose to receive them, and getting them vs. not getting them made no difference in conversion past the free trial. Users didn’t mind getting email, but they did mind being asked. We derive monetary value from sending customers email, and subscribing users by default causes fewer than 1 complaint per 10,000 emails sent. In summary, a website has every incentive to email its customers, and I don’t begrudge those attempts [3]. The problem is that these companies aren’t respecting my ability to unsubscribe.

Skritter newsletters go out to a lot of people every month, and folks seem to enjoy it. We easily get 10 positive responses to our newsletter for every request to unsubscribe. I suspect the reason is that we provide a one-click unsubscribe link that respects people’s time and privacy. If my company were 20x larger, we would probably want to send more and different email to customers. But complexity doesn’t magic away a company’s responsibility to allow innocents like me to easily opt out of their email presence. When a company asks me to “Manage my Preferences,” they disrespect my time and fracture my trust.

[1] LinkedIn and TripAdvisor spring to mind as companies that have foisted this on me just in the past 7 days. I still can’t figure out how to make the Trip Advisor emails to stop, even after wandering around the “My Account” section on my laptop for several minutes.

[2] The tip emails were a series of 5 emails sent to users during their trial periods that introduced them to site features. They were 100% instructional and intended to increase engagement. We didn’t put marketing or sales materials in them.

[3] In fact, in Fred Wilson’s recent 30-10-10 blog post mentioned that email is a very good way to increase engagement.

When you are running a subscription-based web app, cancellations are a part of everyday life. At Skritter, we realized early on that knowing why people cancelled would be of critical importance. We ask everyone who cancels to let us know why, and a surprising 50% of people actually do. We get these missives via emails and I track them to keep a pulse on what we need to improve. And so it was a fairly routine morning several months back, while reading one such cancellation email, that I was struck by what the user had written:

“I have no money these days. Great program, but $10 is a bit too expensive. Would sign up and keep it for 1/2 the price. Netflix costs less than you guys.” [1]

What struck me was the comparison to Netflix, which is a company unrelated to our niche. Comparing prices between products is nothing new of course, and the big players in any space will always influence prices for the little guys, but this was personal for two reasons. First, I use Netflix all the time and personally love the company and their product. Second, I also happen to run a small startup which charges more per month than the big red giant I so adore. This user’s comment seemed damning because while Skritter helps people a lot, it was hard to argue that Skritter is more fun than 20,000 streaming movies, or better value.

This got me thinking about web app subscriptions as a whole. For founders, choosing a price for your product is difficult. It’s also one of the most important decisions you will make as a business owner. So it’s no surprise, faced with such an important decision, that many founders–ourselves included–look to the market for pricing clues.

What concerns me is the downward homogenization of subscription prices. Back when monthly subscriptions were relatively unusual, there was less consensus regarding what an online web application should cost per month. Was it $50? Or was it $2? There was and is no one right answer for all founders. Unlike the market 2 years ago, however, customers seem more certain today how much web apps should cost. This certainty is being driven by relative giants, the Netflixes and Xbox Lives of the world, who seem to be settling on a base price between $5-10/mo.

Just as people browsing the iOS App Store [2] expect paid apps to be a few dollars [3], so too are customers now expecting to pay a certain amount for consumer web applications.

Big companies are providing customers with price anchors which will increasingly impact customer impressions of relative expense. While individual web apps will always have unique aspects that enable variable pricing, I don’t think the day is far off when a young entrepreneur starting a B2C web app will unthinkingly set his price at $8.95/mo because that’s what everyone expects.

The trend, however, is worse still. Because large consumer internet brands–like the industrial widget manufacturers of old–can leverage similar mass production economics, the perceived “correct” cost of a web app is likely to decline over time. Netflix already benefits from a virtuous cycle of user adoption, which allows it to reap more profit by lowering prices. There will be some basement price at which Netflix will no longer want to lower their price, but given that it used to cost $14.99/mo to get worse service than I currently get for $7.95/mo, I suspect that price is lower still.[5]

So, this leads to the title of this article: for those of us in far remote niches of the internet, I believe that companies like Netflix have an increasing ability to ruin the perceived value add of B2C products through increasingly lower prices. What do you think?

[1] I have cleaned up the grammar a bit from the original quote.

[2] What with Amazon, Chrome, Android, and Facebook app markets, it’s become necessary to qualify which app store I’m referring to.

[3] $4.03 for iPhones, and $4.37 for iPads, according to marketing firm Distimo.

[4] And perhaps more importantly, the predictability of revenue streams.

[5] I am aware that Netflix is now charging double for DVD and streaming service, but let’s face it: streaming is the future, and it’s way better than waiting for DVDs. Restricted selection? Still better than shipping DVDs.

Four months ago my two co-founders and I went to visit one of our investors for a quarterly check-in. Our investor runs an iOS development company from a renovated turn-of-the-century office atop a 28 story building. It would be an understatement to call his experience and surroundings impressive.

While sitting in front of a 9 foot window that looked out on most of downtown, we were discussing plans for our upcoming iOS app. Specifically, we were discussing how many features should be included in version 1. We had just started to translate the code to Objective C, and we were trying to define the scope of the project. Our development approach to date had been to build a quick and dirty v.1 and use it to gauge user interest. The process had served us very well.

Like an all-knowing Buddha, our investor grabbed a nearby white board and drew a graph similar to the one at the top of this post.

“What does this graph tell you about the features you need in version 1?” he asked, pushing the graph towards us.

We all three thought for a moment. None of us liked the implications, but Nick eventually replied “I guess we can’t build a minimum viable product then.”

Our investor just nodded and gave us a smirk that seemed to say “sucks, doesn’t it?”

What he knew was that the window of opportunity for a hot app on the App Store was measured in days, and especially for the kind of app we were building, a Hollywood Launch was the way to go.

When we actually starting building the app, we had our product scope waiting: it needed to be full-featured and polished. Prior to that meeting, we didn’t know anything about the App Store as a platform. What our investor let us know was that building an MVP iPhone app would have been as stupid and useless for my co-founders and I as trying to iterate our way through FDA drug approvals for a new medicine.

Knowing your platform makes you a more effective entrepreneur. It means you have a better grasp of how your product will be disseminated and used. This means you can cut out unproductive iterations and get to pay dirt faster. Whether your entrepreneurial ambitions are to make enterprise software or fluffy mobile apps, qualified knowledge of your platform will significantly reduce the number of times you have to pivot strategies. And in some cases (like ours), platform knowledge can save the project completely. Had we made an iOS app that wasn’t polished on day one, we would have thrown away our best chance to test the market and make money on our creation.

Even going between two similar platforms (web apps to mobile versions of web apps) requires entrepreneurs to have a firm grasp of the differences of the platforms. Most of the time you won’t have a kindly investor at your shoulder to reiterate this point, which means you have to know platform without being told. Sucks, doesn’t it?