Transcript
[00:00] Rob: This is startups for the rest of us episode 70.
[00:02][Music]
[00:12] Rob: Welcome to startups for the rest of us, the podcast to help developers, designers, entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:22] Mike: And I’m Mike.
[00:22] Rob: And we’re here to share our experiences to help you avoid you the same mistakes we’ve made. What’s the word this week Mike?
[00:28] Mike: I’m trying to finally whittle down the massive paperwork that has just kind of stacked up over the past couple of weeks. So mostly invoices but just trying to get my stuff prepared for tax season, you know as you run a business you’ve got to have your taxes done like a month before everyone else. It’s kind of a pain but you know goes with the territory.
[00:44] Rob: Right. Yeah I haven’t even started looking at my stuff, I’ll probably do, I’m going to LessConf next week and then I think after that I’ll probably start looking at it.
[00:51] Mike: Oh you’ve only got like three weeks.
[00:54] Rob: No, not for mine. I’m not a Corp. I’m an LLC, so mine’s due April 15th yeah.
[01:00] Mike: Oh so you don’t…okay.
[01:01] Rob: I’ve not, I do pay quarterly you know estimated. I don’t have the weird deadlines like you. I think that’s because you’re a corp right?
[01:07] Mike: Yeah. Probably because I’ve to two S Corps and due to March 15th.
[01:11] Rob: March 15th? Yeah. That’s federal too right, it’s IRS not your state.
[01:16] Mike: No it’s just for the business. Like the business taxes are due the 15th of March and then the following month that’s when my personal taxes are due in because everything is done as an S Corp and it’s all done as a pass through to my own personal taxes. You know that relies on a lot of the numbers that I get from my business taxes. Most of the times everything is done around March 15th but…
[01:35] Rob: The stuff that’s due on March 15th is that your IRS or federal taxes or is that your state taxes for your business or is it both?
[01:43] Mike: Yeah I think it’s both.
[01:44] Rob: Okay for me both are due in April but I can imagine if Massachusetts could easily have a different deadline.
[01:49] Mike: Yeah I think with LLC is you get to choose.
[01:52] Rob: Yeah you can treat the LLC earnings as like a pass through like it’s a sole proprietorship or you can do it like an S Corp and I do an S Corp but it’s still doesn’t mean, like it doesn’t mean that I have to file it like an S Corp. It’s kind of weird. Wait, I have to file like an S Corp but I don’t have to file it at the same deadline as if it were an actual S Corp. Everyone’s rolling their eyes and falling asleep right now. We need to move on.
[02:14] So I’m going to LessConf next week I am speaking for the first time at that conference and I have forgotten how hard it is to write a talk from scratch. Because the last time I wrote a talk was well over a year ago and then I did that same talk five or six times, actually it was seven times in one year and by the end of it, I had gotten really good at it where I didn’t need to rehearse. I had honed the talk, I had eliminated the bad parts, added in the good parts, added in good jokes, you know I mean I had all the material there.
[02:44] And just starting from a blank page again and not wanting to repeat any material is shockingly difficult. I budgeted like a day to do it and I’m about a halfway through my third day. Trying to get the material and it’s only a 35 minute talk and so I’m trying to get down. I’m looking forward to LessConf next week in Atlanta but don’t know how many more years of this I’m going to do. I enjoy the speaking but I’m thinking like good grief, I just for got how time consuming it actually is to put together a good talk.
[03:07 Mike: Yeah I know what you’re saying I still got to do something for MicroConf. As you know I don’t even have my talk topic yet. So I’m still trying to figure out exactly what it is that I want to talk about but I’m sure I’ll come up with something. I was considering doing a talk on how to pivot, come up with something. One thing I forgot to mention last week was that remember how I had said that 21times.org had sent out a link to Episode 66, I forgot to mention that they’re actually looking for developers who are willing to write for them as well. They do have funds set aside to pay writers so if anyone out there is interested in doing some writing and getting paid for it they are looking specifically for people who have a developer background to write for them. So just drop a line to them at support@21times.org.
[03:53] Rob: That’s a trip I’m actually going to contact them. I saw that Patrick McKenzie had I think it was a blog post kind of republished through them and so I’d be intrigued to do that as well.
[04:01] Mike: Cool. You know the other thing in doing my taxes and stuff I’ve also decided that I think I’m going to shut down Moon River Consulting completely later this year.
[04:10] Rob: Really? Wow. For listeners who don’t know Mike has to S Corps. One is Moon River Consulting that he typically runs his consulting through and the other is Moon River Software and that’s where he’s run all his product revenue through. So you’re thinking about shutting one of them down, why is that?
[04:22] Mike: Well when I had originally started Moon River Consulting it was because there was this mass of consulting business that was coming in and I really wanted, there were a couple of different reasons I wanted to separate the two businesses. But one of them had to do with legal reasons and those reasons have essentially gone away at this point. There is very very little need for me to actually have both of the businesses and in going through and starting to do my taxes I’ve realized I’m paying for a lot of things twice. I mean a lot of services I’m paying double for.
[04:56] So if I want to have an account on you know for like SEO miles or something like that, it’s difficult to have one for Moon River Software that I also use for Moon River Consulting. And that’s not just one example, I mean there are a lot of other places like you know Fresh Books and various other online services that I would like to use or I am using and it would be nice to have another account to use for other things. But at the same time I’m not willing to shell out all that money for you know two different accounts for what is almost the same business.
[05:29] So really I’m just kind of looking at consolidating a lot of those things and I have kind of done the math in my head a little bit and figure I can probably save two, three maybe $4000 a year just by consolidating the two. And like I said I don’t need both companies any more.
[05:43] Rob: Yeah that totally makes sense. I remember looking at this and you know since I have all the different products I had entertained the idea of incorporating them separately or doing something like that. And I remember that it was a huge added cost. I hadn’t even thought about that, needing MailChimp accounts because you want to split the expenses but that makes sense because all my, Numa group is an LLC and everything else is an umbrella. My products are umbrellas under it.
[06:07] But I do have three MailChimp accounts because I have one for the Numa group, all the products under it and then we have one for the academy and then I have one for Dot Net invoice because that’s a separate partnership so it does make sense that you’d have a bunch of duplicate costs. Good luck with that it sounds like the right thing to do if it can save you some money and hustle and paperwork.
[06:23] Mike: Yeah and it’s really cutting down on the paperwork because if I can hire somebody fulltime just to handle paperwork for me at this point it would almost be worth it. So anything that can reduce the amount of paperwork and hustle that I have to do that’s definitely the way I’ve got to go.
[06:37] Rob: Yeah sure. The Hit Tail billing code is running and since the relaunch it has been about 36 days or something and the reason that’s important is because I have a 30 day trial so I’m actually now starting to get some really preliminary data of how many of the new cohort from the new design, you know where I require a credit card upfront. How many of those folks are actually converting to paid customers and so it is exciting to be at that point where I can start seeing a trend and starting to figure out how to improve that. So other than that I have been just continuing to try to outsource as much as possible the last week to, you know virtual assistants and a couple of CSS guys I have working so.
[07:09] Mike: I would outsource my paperwork but some of it involves scanning receipts and things like that and I can’t, I’d have to scan them and then send them to a VA who could then scan them.
[07:24] Rob: It’s funny because the daycare that takes care of our kids actually had the same issue and there is a service that will do this for you and it’s for, it goes ten bucks a month starting. Shoe Box or Shoe Boxed, you can mail them receipts and they’ll scan them.
[07:36] Mike: Yeah I’ve seen some other services, one of which was you could actually take a picture of your receipt with your phone and upload it and then they would have somebody plug in all the numbers for you and then you could put them in your Excel or whatever. I thought about doing something along those lines but…
[07:51] Rob: Shoe Box has both of those. It has the iPhone and the iPad apps and then or you can just email them or scan them so it has a lot of different options. And that’s what, I actually recommended it to this friend of mine that runs the daycare and she’s like, oh we’ve moved some of my week to week headache to be able to get the receipt scanning of my desk.
[08:10] Mike: That’s cool, maybe I’ll take a look at that one. But this kind of ties in to me eliminating Moon River Consulting and just switching things over to Moon River Software because if I can integrate something like this with Fresh Books and a couple of other things then it would greatly simplify my life and really reduce the amount of time that I spend on all the stuff that’s essentially overhead that I don’t want to have to deal with.
[08:30] Rob: Cool.
[08:30] Mike: I did have one other thing, what exactly is the competition that we have going with TechZing? Do we win something if we win here, what are our goals?
[08:40] Rob: What happened is we were talking about it and we said we were at 75 and so then they said they wanted to get to 100. And so then I said let’s try to get to 125 and then you and I just kind of tossed around and said well oh whoever loses has to buy beers at MicroConf. They haven’t really agreed to that per se but I bet, you know it’s a friendly competition.
[08:58] Mike: I wanted to send out a special thanks to Sean Murphy, he owns the website, recursive.io. And what he did was he actually put together a PHP script that he’s hosted on Get Hub that iterates through all the different languages that iTunes supports and counts all the ratings, adds them up and shows them to you.
[09:16] Rob: Wow.
[09:17] Mike: So he actually plugged it in, he just set with a variable one for startups for the rest of us, one for TechZing and we are currently winning 116 to 80 right now. So 36 ratings more than they do.
[09:30] Rob: That’s crazy, well that’s a cool script man. Bravo, so yeah bravo Sean that’s awesome. I can’t imagine flipping through the iTunes, you know it’s like what API did you need to connect to that or what crazy screen scrapping did you do because it’s not HTML.
[09:44] Mike: He just went directly against Apple’s website, it’s just like a URL call really.
[09:49] Rob: Oh interesting, that makes it a little easier then he didn’t go into iTunes, okay.
[09:53] Mike: He did go into iTunes but it’s you know, it’s sign their I know that, I saw a Jason query in there but it was just a PHP script that he wrote and it just does everything all web based.
[10:02] Rob: Oh that’s cool. Yeah thanks for doing that we can easily keep track of the competition that way.
[10:05] [Music].
[10:08] Mike: What’s on the agenda for today?
[10:10] Rob: Today we’re going to be covering listener questions. I went into the treasure troves of audio and text questions. I was going to pick one out and design a whole episode around it but we have so many all of a sudden. They just stack up and I forget so I think we have another 15 questions in the backlog and I just picked out four or five and we’ll get through as many as we can given the time constraints.
[10:32] Craig: Hey guys this is Craig from Michigan. You guys have been having a lot of recaps or review on the podcast really. And I remember about a year ago Rob you had mentioned you had purchased a bundle of websites, I think they were Ad Revenue or Ad Sense websites. I was just kind of curious I didn’t hear much about that since you purchased them. Have you been updating them, have you been working on them at all, have you sold them? Are they still like within the search engine rankings or are they re affected by Panda this past year, Panda updates from Google? And also do you consider like that a viable business to pursue for someone who’s not necessarily interested in building a web app? So I’d like to hear you comments on that and how those are going. Thanks for your time guys.
[11:11] Rob: Cool. So I like this question because it kind of pointed out, you know it is one of those things that we say, oh we’ll come back to that and we never did. So I’m glad he raised it. I do still have the sites, I have a total of , I bought a block of eight and then I bought two other individual ones. And they paid back their purchase price, I think it was about, within a couple of months actually. I think I’ve owned them for what maybe eight months. They did get hit hard by Panda, they would have paid themselves back pretty quickly. But they got hammered when Panda came out and so they had some issues, I think like traffic and revenue dropped basically by half.
[11:48] So at this point I haven’t updated much of the content. They continued to rank well for the terms that they rank for and frankly I got caught up with MicroConf and then with buying HitTail and then with the next MicroConf and then I’m going to start working on my second book here soon. So they’ve kind of gone on the backburner and I figured that they would. I spent a bunch of time experimenting upfront with moving around the Ad units and just kind of learning about the whole world and it was cool to learn about it but it wasn’t anything I was going to turn into a massive earner.
[12:21] The nice thing about them is they really don’t need to be updated, you know that they can continue to earn even at the level they are now. It’s just kind of bringing in a nice trickle of income, a few hundred bucks a month. I do build a link or two every once in a while and they just, they maintain. So I think overall the final part of the question is, could I recommend that as a reasonable way to make money? And there are a lot of people that actually do quite well with these sites. They’re called Niche sites and the guy at viperchill.com, his name is Glen Alsop, he does pretty well. Then there is actually the AdSense Flippers which, their name sounds like scammy but they’re legit. Like they go Lifestyle Business Podcast and Dan Andrews knows that they know their stuff.
[13:02] And if you’re thinking about going that avenue I would totally check out both those blogs. But I think the thing for me personally is if they can make money but they’re not actually, it’s not actually that interesting to do. I think building a process to maybe produce them you know in an automated fashion would be interesting intriguing to do. But it’s not that exciting for me personally you know. Certainly I think the positive side of it is that it can make a few hundred bucks a month fairly easily with no support, you know it’s not like having a web app.
[13:29] And so then you can then use that to springboard to buy other stuff or to launch other apps and you kind of have a nice recurring stream of revenue there to help get other businesses started which is actually some of the stuff that I did early on in buying some of the non startup businesses that I did. They were really to fund the acquisition of later apps. Well cool. Let’s look at our next question. I’ve kind of coined some titles for each of these, this one is “ what if your product has no defined market?” And it’s from Hanna Wiley.
[13:58] She says, hi Mike and Rob. I listen with great interest to your listener’s question podcast episode 63. You gave the advice to make sure there is a market and get customers before ever creating software. The marketing is more important than the actual coding, customers before product. This seems like great advice, but what if you are like me creating a software application that is completely unique and not solving a specific customer problem? I’m talking about a social app, like Foursquare, Twitter, Facebook or Flickr.
[14:24] I have an IDM passion so this is not just about the money. It’s a totally innovative social utility application that will engage users and it will to monetize and will even be a service to users once they start using it and realize how much they like it. But it doesn’t come up from a specific need, from a specific client profile. With that in mind and considering that I am the idea girl and understand where this can go and have a great knack for marketing and networking, do you suggest I create a prototype to have beta testers use, pitch the idea to investors, outsource a prototype, find a tech co founder? I know this sounds a bit out of scope but I’m sure other listeners out there are in similar situations. Much appreciated. What do you think sir?
[15:03] Mike: To me I don’t want to sound overly negative but this sounds more like pie in the sky, this should do great, this is an awesome idea and everybody is going to love it. The idea of getting the customers first or making sure that they are customers is understanding that there is some sort of a need that people are trying to fulfill, you know they’re having a problem with something. And I guess social applications don’t really fit that. I mean what was the need that Twitter fulfilled? What was the need that Facebook fulfilled and is there any kind of real monetization that you can do behind that?
[15:35] And I don’t think that there is, at least not upfront, whatever you do to monetize the idea is not going to be obvious, those are the types of things that I think fall outside of the scope of customers before product. My suggestion probably would be to start talking to investors and see if you can pitch the idea to them so that you can work on it for a while. It seems to me that this is the kind of thing that they would latch on to. I mean they’re looking for things that are not necessarily a complete shot in the dark but are a reasonable idea that if pulled if and executed well could do extremely well and get a lot of returns.
[16:12] But if you’re looking to monetize and you know keep it to yourself you really need something where you’re solving a problem. But this doesn’t sound like that. It sounds more like you’re interested in building something that you’ve got this vision for and you’re okay with taking the money to do it. And that sounds to me like a perfectly reasonable option. But that’s more for the specific situation, I think that it’s just going to be difficult to say what exactly those customers are looking for because it’s not a problem you’re solving.
[16:40] Rob: Right, there are a few tiers of applications and customer needs and there’s apps that customers don’t know they need and are not looking for. Then there are apps that customers know they need and are looking for and there is everything in between. Actually I have this matrix that I’m going to put in some future talks. Then this will lie in the ‘don’t know they need and are not looking for’. And what that means is you almost for sure that you’ll need to get funding, I mean there is no way this is a microprenuer business, I don’t see any stretch of imagination that you’re going to be a single founder and pull this off.
[17:11] I mean you’re going to need to raise funding and go big or viral with this thing. Now what that means is the chances of you know what Mike and I talk about, kind of the solving a problem businesses, the chances of those succeeding vary but if you get pretty good at it and you can identify a market first and actually get people interested I would say you’ve got a 10, 20, 30% chance of succeeding with something like that. Whereas the idea that Hanna is talking about I mean literally I would give it a one in ten thousand, it’s just a whole different world.
[17:38] Now the payoff if you become Twitter, Facebook or Flickr is obviously much larger. But it’s just such as an astronomically smaller chance, maybe even one in hundred thousand or one in a million. For me having tried I went after three ideas that were not probably this large but I went after three of them when I was in New Haven Connecticut in 2007 all of them failed and I look back at my year and I thought I could have built a real business during this time you know. And that’s what I then did, that’s when I really started attacking this whole approach that Mike and I talked about.
[18:06] So I’m not saying you should or should not do this. If you’re passionate about it, go after it. But a lot of the stuff that Mike and I say is not going to apply to you, like we talk about solving real problems, building real software and actually going after customer needs. That’s the way we build businesses. So I think your first step would be to recruit a technical co founder and I think that the way you’re going to do that is you’re going to need design comps or you’re going to need to have people who tell you that they would use this.
[18:35] So you need to convince a technical co founder to come on board with you and for the two of you to invest an equal amount of time. So that technical co founder needs to invest ten hours a week for six months to build your prototype. You need to figure out a way to invest ten hours a week of your time into doing the marketing and the networking and getting things rolling and probably start conversations with investors. I don’t think you should look for investment before you have some kind of technical prototype. It depends on the complexity of what you’re trying to do but the earlier you look the more of your company you’re going to give them for not very much money.
[19:06] At least if you get a prototype out you get people using it, you have some leverage, you can say we’re worth something.
[19:12] Mike: Yeah I had a conversation a few weeks ago with somebody who was in the midst of going out and looking for funding and he basically said upfront, I mean he’s gotten funding for one of his companies before. And he basically said that at this point in order to get funding you essentially, you need to have a prototype of some kind. And then beyond that as long as you have, in this case it’s a little different because the monetization strategy isn’t clear yet.
[19:36] But if you have customers at least if you have three to five customers, three to five customers is just as good as 100 customers in the eyes of an investor because they feel like you’re going to have to pivot and change and do things a little bit differently anyway. So those things are kind of throwaways. But it proves that, the idea proves that people are willing people are willing to pay for it. With something that people aren’t paying for things maybe a little different.
[19:57] Rob: Right, very good.
[19:58] [Music]
[20:00] Rob: So for our next question I’ve titled this one “ what to do when you die?” And this is from Rob Watsler. And he says, hey Rob and Mike. I’ve enjoyed your podcast and I’ve tried to listen to all of them since the beginning, great stuff. Anyway I’ve missed a few episodes so I’m not sure if you’ve covered this topic or not but I thought it might be a good topic if you haven’t. Topic is, what is your plan if you die or how do you plan for a disaster even if that disaster is the owner passing away?
[20:25] He basically goes on to say that his father had several businesses and he had passed away and they had a bunch of things to think about like should we sell all of his businesses or just some of them? Should my mom take over the paycheck temporarily, what legal things need to get done, you know when do we decide to sell, do we need a broker? Anyway, keep up the great work. Thanks, Rob Wastler.
[20:43] Mike you replied to him via email basically saying, I had thoughts on it, definitely we don’t want to give him or anyone like specific advice on what to do because this stuff is super super complicated. And it depends where you live both your state and your country and how laws work out. I mean inherent taxes and all that stuff. But I know that I have put some thoughts specifically into my portfolio of businesses. And I actually have someone in my mind who, it’s on my to do list to approach him and make a deal back and forth because he and I both have some small web apps and basically say, if I die I want you to sell them and basically give my wife the money and you get obviously like a commission or small fee for doing that and vice versa I will do it for him if he dies.
[21:22] So beyond that I mean you know we have a living trust type thing that you set up but I don’t have any of my businesses in it. And frankly I’ve never even looked into doing so. Have you thought about this before Mike?
[21:33] Mike: Well I thought about it when he originally sent this over and I think that this is kind of a specific situation but I think that in general when you’re setting up your business you kind of have to look at and figure out whether any of those businesses are things that could be perpetuated without your knowledge after you leave or if you know if you’re no longer around. And if that’s the case then it’s possible for you to essentially keep them within the family and then hand them off to your spouse or kids or whoever and allow them to run them.
[22:03] As long as you’ve essentially documented all the things that you’re doing to kind of keep the business running and maybe thoughts and projections for the future at the same time if there’s going to be some things that are just too small. Like I’m sure that there are few businesses you have that generate maybe a couple of hundred dollars a month at most that are just really not worth a whole heck of a lot. In order to keep those going probably takes up a little bit of your time. But are not things that you’re going to be able to pass that knowledge on to other people.
[22:30] So those essentially are things that could either be sold off or should be sold off immediately as opposed to you know holding on to them for your wife and kids. And then there’s those things where they do have a lot of intrinsic value like for example HitTail, I mean you obviously spent a fair chunk of change to acquire it. I don’t think we’ve talked exactly how much but it’s not a trivial acquisition either. I mean that’s something that could fetch a fairly high price. And whether that gets sold the day after you passed away or whether it was two or three months, probably not a huge difference they’d have to do something within a couple of years I would think. Otherwise things are going to start trailing downhill.
[23:07] You can’t just let those things go on autopilot for so long because the traffic is going to nosedive, sales are going to nosedive, people aren’t going to be responding to the support requests, those sorts of things. So those are the types of things that I think you have to take into consideration and in terms of this particular listener’s question I mean I think those are the same sorts of things that you have to address and deal with.
[23:29] One of the big differences that I think that he’s got is that his father’s company also had employees and these were brick and mortar companies. I mean how do you ensure that those employees either still have jobs or keep them posted on what’s going to happen. Maybe in those situations you take the business and you sell it to the employees and say, hey would you guys like to buy this outright? Because the people already know the business, they’re already running it presumably. Hopefully they could just take it over and essentially you’re selling it to them and they’re essentially building on their own future.
[23:56] Rob: Those are good points, those are good differences between what Rob has gone on and you know where you are we have going on. I think it’s also interesting to think about you know my kids are really young but given that my wife has absolutely no interest in learning the tech stuff or anything but that one of my kids may, that my situation may change in 20 years. I’m still in my 30s and so in 20 years you know I hope to still be alive and I may not want to have those sold by a friend. You’re right, like my kid might want to take over assuming they’re still around and doing well. So that’s a perfectly legitimate idea as well and something that will probably change as they get older.
[24:32] Mike: What you said is exactly right. Your situation will change as your age gets older and as your kids start to mature. Maybe they will be interested but at the same time if they’re not, dumping it on them with the expectation of them trying to carry it forward, I mean there is going to be that, I don’t want to say a guilt factor but they may feel sort of an obligation to try and carry it forward when the reality is, one they don’t want to but they’re going to feel obligated to. So you have to take those things into mind, at least have the conversations with people.
[25:04] Rob: Moving on, the next one I’ve titled, “ how to market a $1 app”. It’s from Martin Crets and he says, hi Mike and Rob. He says, love your podcast, listen to them on the way to the office in the mornings. I’m a software developer doing mobile apps since many years back and self employed the last year. Hey congrats. I have a question on how to choose a strategy to market one of the apps I have created. It’s a wallpaper application for Android that bounces balls like soccer, rugby or tennis etcetera around the screen with physics. I have a free version as well with less settings.
[25:35] Since the app is not a SaaS app which is a prescription model and only costs $1 as onetime fee, I can’t see how AdWords would work for acquiring customers. What approach to marketing would you recommend for this type of mobile app and at this price point? Thanks a lot. Keep up the good work. This is Martin from Sweden.
[25:50] Mike: I just heard a discussion within the past month or so but I remember reading it and thinking myself at the time that that was interesting. One of the things that you can do is if you’re a mobile app developer and you have more than one more app, it makes sense to cross promote your applications between them. So essentially if you have this, you know product one you advertise for product two within product one, and within then product two you advertise for product one, as you grow your portfolio of these small applications you can essentially get cross promote the applications.
[26:23] And I don’t think that they need to be related. I think that what you can do is you can say, hey check out our other apps including and then maybe you list those. And you have that as your startup screen or something like that. You just play it for a couple of seconds. The interesting thing that I heard somebody discussing about a month ago was that Apple I believe has some sort of embedded developer network, advertising network that you could essentially advertise other things inside of your iOS apps.
[26:52] And one of the things that they do is they actually provide you with a commission if somebody buys something else within the next I think 24 or 48 hours or something like that. And regardless of what it is that the bought even if it’s whether it’s your app or somebody else’s app that got promoted or if it’s an album or a movie or anything like that, you get credit for it if it’s within a certain timeframe. And the article that I was reading was essentially saying that when you get this going this small network of apps, you can actually make a lot more money from this advertising network than you can from your apps themselves because when people use your apps it’s possible for them to click on something and then they go buy something in iTunes later. And you get credit for it.
[27:35] Rob: I feel like you’ve nailed a couple of good tactics. So the second suggestion you had about the affiliate stuff was really a way to better monetize it. Because there is like two sides to the equation right, there is the cost per acquisition, how much you have to pay to get a person to buy your app. And when you have a $1 app that’s brutal. I mean no, I don’t know of any paid acquisition strategy that could possibly work for a $1 app. I mean AdWords even at its cheapest right now in minimal niches is between 30 and $100 per customer acquisition if you have a 1% closure rate.
[28:08] And in a lot of niches it’s 3 to 500 and up, like for Dot Net Invoice, it’s almost $500 to acquire a customer. So there is no chance that a $1 app is going to work with any of the paid approaches I know right now. So what you are saying is basically to increase that other side, that lifetime value side so that the lifetime value of the customer is not just the dollar they pay you but it’s a percentage of all the stuff they buy your app for the next however many years they use it which is kind of a cool thing right. Because then that could make your lifetime value of a customer four, five or six bucks, you still can do paid acquisition but at least then you don’t have to sell as many copies of the app.
[28:43] Mike: Right. But the two sides of it, the first one was advertising for your other apps within the apps that you already have. So you’re trying to essentially get the customer to buy any given customer who finds your app, you want them to also buy your other apps because you obviously get 70% of that. And then in addition to that there’s this advertising network that, again I’m not familiar with any of you iOS developers out there. Please forgive me for totally messing up all the details on this but there is something out there that you can piggyback on to essentially boost that even further.
[29:14] Now what I think all that stuff does is not address is his fundamental question which was, how do I choose a market strategy for the apps that I have created when I don’t have any customers yet?
[29:25] Rob: Well I don’t know that he’s said that he didn’t have customers but I think your idea of as soon as you have customers you start funneling them into the other apps is a huge win. I mean that’s what I’ve seen a lot of people who are successful with iOS apps, they have 20 or 30 apps in the stores and they cross promote them. Because the real issue with mobile apps is how cheap they are. There really are no paid ways to get customers.
[29:46] And so to address his question of like how do I market this thing, I mean it’s going to be, have to all be three approaches. It’s going to have to be like getting in the top ten list and going on podcast or trying to get on blogs and making a viral video. It’s going to be that kind of stuff which is time consuming.
[30:00] Mike: Or light versions of it. I’ve seen lot’s of apps where there is a light version and then there is the regular version. You know the light version is just a stripped down…
[30:08] Rob: He mentioned that he has a free version that doesn’t have as many features. But it’s like gosh, you know dude you have a free version of your software and then you’re trying to get people to upgrade to a $1 version that you get 70 cents from, you’ve got to sell a lot of copies to make any real money from that. So truthfully I don’t fully get the whole mobile space, I’m just I’m skeptical of it in the long term.
[30:29] I think that in the long term with the market is growing dramatically right now. They’re selling bazillions of iPhones and bazillions of Androids and I know they’ll continue to sell these things. But how many iOS apps am I going to buy over the next ten years? And how much revenue and recurring revenues does that really create? I think while the market is growing you can have an app that’s selling for 99 cents apiece without subscription billing and you can make good money. And we know some developers are doing that, it’s like one or two percent of the apps but it’s still, it’s possible.
[30:57] But I think over the long term I really do question with like without subscription billing how can you possibly maintain high enough lifetime values when you’re really selling something for 99 cents a pop.
[31:06] Mike: I think it’s mentally difficult to justify it but at the same time I do know people who are making tons of thousands of dollars in there and they’re making a fulltime living from it easily.
[31:16] Rob: It seems to me like it’s more of a crapshoot though right? It’s like there are what, half a million, 600,000 apps in the store now and they say like the top 1 to 2% make 90 something percent of the money. I mean it’s kind of like the startup lottery I see, although maybe it’s not as pronounced.
[31:32] Mike: Maybe. I don’t know, it’s hard to say. I haven’t looked at it deep enough into the numbers, I know that there is that dramatic drop off but you also have to remember that the vast majority of the apps in there are free apps. So they really skew the numbers. And I just, I haven’t looked at the numbers enough how realistic it is because you can spin those things anyway you want.
[31:52] Rob: Sure. Yeah and I don’t proclaim to be an expert, it’s just from the stuff that I’ve read. I’m like, I kind of raise an eyebrow when I read it of like, huh how many people is this actually working for? You know it’s the survival buyers thing like how much are we just hearing about the big successes and how long can this last once the market is not growing it like 100% per year.
[32:12] Mike: No that’s a fair question.
[32:14] Rob: Martin I hope that helps.
[32:16] [Music]
[32:18] Rob: Alright this last question is from John Paul Jones. And it’s about Google AdWords. Hi Rob and Mike. Love the show and listen every week. I have an established product that’s been selling for over five years, it’s called FS Flying School Pro it’s an add on for Microsoft Flight Simulator. We get a lot of traffic through specialist news sites but we’ve recently been thinking about trying Google AdWords. I’d be interested to hear any tip for established products that want to do better and whether academy membership or HitTail could provide any benefit. Thanks. John, fsflyingschool.com
[32:51] Rob: So it seems like there’s two parts of the question is should you think about Google AdWords and then could the academy membership or HitTail help him out. As I said before you know AdWords is great but the cost to acquire a customer tends to be quite high. So I don’t know what your product sells for I haven’t been to the website. But unless your lifetime value of the customer is more than 50 bucks I wouldn’t even think about AdWords at this point unless you know you can go in and do a quick search and see what the AdWord costs are.
[33:21] If they are 20, 30 cents a click, then maybe you can swing it but most clicks these days are again over a buck and it instantly means that your cost to acquire a customer is just too high. Now SEO may be a better alternative especially if you’re in a niche that’s fairly none competitive, definitely could be something to check out. You can CPAs cost per customer acquisition that are a lot lower than AdWords. So that’s something I would recommend looking into.
[33:46] In terms of the academy or HitTail, I definitely think if you do go SEO, HitTail can help out. I mean it’s like 10 bucks a month and it’s going to give you long tail keyword terms that people are searching and that you’re not currently ranking well for and that’s just a great system to start cranking out some blog posts for those keywords and to build up a long tail of traffic over time. In terms of the academy so for new listeners Mike and I run something called the Micropreneur Academy, it’s at micropreneur.com. It’s a membership website for people looking to either launch their startup in 4 to 6 months or to improve their startup basically, startup or software product.
[34:19] And so it depends you know. We definitely have modules that cover this, cover AdWords, cover SEO. We also have a lot of other material about getting into the mindset of micropreneurship that goes deeper into the stuff that we talk about on the podcast. So I think the bottom line is I do think it can help, there is a community of folks in there as well. It’s up to you, there is a seven day trial you can go to the website and check it out.
[34:42] I mean I think the last thing I’ll add John is if you do go for Google AdWords there is a really good book by Perry Marshall that covers Google AdWords and I’d recommend checking it out, it’s like called The Ultimate Guide to Google AdWords.
[34:53] Mike: I wonder if there is any sort of affiliate link for selling the Microsoft Flight Simulator.
[34:59] Rob: Oh that he could make some money from? Do you think anyone would come to his site who doesn’t already have Flight Simulator though?
[35:06] Mike: I don’t know. That’s a question for him. Maybe, I mean he does have a Flight Simulator add on so there maybe people coming to his site that he’s not converting because he doesn’t actually have a Flight Simulator. If he had the ability to sell the Flight Simulator and the add on pack for it at the same time, he may very well end up converting more customers.
[35:26] Rob: Could be.
[35:27] Mike: That’s the only thing I think I’d add, I don’t think that Google AdWords is a good way to go.
[35:30][Music]
[35:33] Mike: If you have a question or comment you can call it in to our voicemail number at 1-888-801-9690 or email it in MP3 or text format to questions@startupsfortherestofus.com . Our theme music is an excerpt from “ We’re Outta Control” by Moot used under Creative Commons. If you enjoyed this podcast, please consider writing a review in iTunes by searching for startups. We are having that free beers contest with the TechZing guys. You can subscribe to the podcast via iTunes or RSS at startupsfortherestofus.com. A full transcript of the podcast will be available at our website startupsfortherestofus.com. Thanks for listening, we’ll see you next time.
Thanks for answering my question!
I’ve been testing Adwords for the last couple of weeks and have to agree that it’s cost is too high to acquire a new customer for my product(s).