Web Apps 101: Your Three Point Success Plan
Ryan Carson
138 comments »
Building a web app is easy. Building a successful and profitable web app is where most people fail.
In this new series of articles, I will share valuable strategies and tips for building successful web apps. I’ll be covering everything from powerful marketing strategies, how to build a quality team, tips for great customer support and finally, exit strategies.
Building a web app is no different than launching any other product - it needs to be backed by solid business principles. You’ll need funding, a real audience, a solid monetization model, a marketing plan, quality support, and good project management.
The three vital questions
If you want your app to stay out of the Dead Pool, you need to know the answer the following questions:
- Who is it aimed at?
- Why will they use it?
- Will they pay for it?
#1 - Who is it aimed at?
Before you spend any time or resources, it’s vital to know exactly who your app is aimed at. Small business owners? Stay-at-home dads? Spanish speakers? Males under 30? It doesn’t matter, so long as you know who they are.
I believe that some of the best apps come from meeting your own needs. If you ever catch yourself thinking, “Wow, I sure could use …” then it might be a brilliant web app opportunity.
However, if you are not the target user of your web app, proceed with extreme caution. It’s incredibly easy to make faulty assumptions about your audience’s needs or wants. Remember that you’re an early-adopter and way more technically advanced than your average person. In many cases, 90% of your customers will think “The Internet” is the blue “e” icon on their desktop.
#2 - Why will they use it?
You may have an amazing idea. Maybe it’s going to help busy mothers organize their shopping list. Sweet. But do busy moms actually need that? Do they even want it?
Here’s some free market research you can do to determine if people will use your app:
- Ask people that you trust. What’s their first reaction?
- Search for terms that are related to your idea. If there’s a lot of online activity about it, you’ve got a good chance (and you’ll probably have competitors to deal with).
- Make sure it’s practical. Imagine someone actually using the app. If anything seems awkward about the actual use of it, be very careful about proceeding.
- Interact with your potential customers. Talk to them, hang out with them, participate in their online forums - get them to tell you what they need.
Making sure there’s a real need for your app is the most important thing before plowing your hard earned time and money into a project.
#3 - Will they pay for it?
This is where the rubber meets the road. You can be zeroed in on your target customers and know they desperately need the app, but if they won’t pay for the dang thing, you’re in trouble.
This is a useful test: close your eyes and imagine you’re one of your potential customers. Walk yourself through their typical day, from when they wake up, to the point where they come across your web app.
Imagine they make it to your “Pricing & Signup” page. Will they be so convinced they need your service that they’ll actually drag out their wallet and enter in all their details? If so, what will they be willing to pay?
If your app is aimed at business owners, they’ll be able to afford spending $49 to $99 per month. If your app is aimed at 15 year old kids, you’d better find an advertising monetization model.
Going the free route
If you’re building an app that is completely free to use (YouTube and digg are great examples) you typically have two options for monetization:
- Advertising
- Acquisition
You should never plan on being acquired. Remember that getting bought for $1.65B (or even $5M) just isn’t likely for 99.9% of web apps. Profitability should be your #1 goal.
You need to have a viable and serious plan for profitability. If you get acquired, great. Just don’t plan on it.
Now for Option #1 - Advertising. It’s a great monetization strategy, providing that you have a solid plan for selling the inventory.
There are three options for selling advertising:
- Use advertising networks (Federated Media, Right Media, etc)
- Hire an advertising sales team
- Use a product like Google AdSense
Ad networks are brilliant because they take all the hard work out of selling ads. It comes at a steep price though - you’ll usually only get 60% or less of the ad revenue.
The next option, hiring your own ad-sales team, is a proven way to get your ad inventory sold … but it’s going to be damn expensive. You’ll typically be looking at paying a basic salary of $20K plus commission for each salesmen.
If you don’t have the cash for a full ad-sales team, here’s how to do it on a budget: See if you can find any friends who are already doing ad-sales and ask if they can do a bit of work on the side for you. They could be paid on commission, so there’s no financial risk to you.
The last option, using a product like AdSense, is only a possibility if your web app is going to receive a very large amount of traffic and is largely content based (Google needs to be able to parse text to offer relevant ads).
Pricing - hitting the sweet spot
If you do decide to charge for your app, determining your prices will be tough.
Every web app builder agonizes over pricing. Should you have a monthly or one time fee? Should you offer a free plan? Should you monetize with ads?
As an example, CrazyEgg and Flickr have two very different pricing strategies.
Here are some practical tips for determining your pricing model:
- Ask folks who know your target market. They’ll help you determine how much disposable income they have to spend on your idea.
- Use a spreadsheet to experiment with your figures and determine where you achieve profibility. I’ve created a straightforward Excel spreadsheet that will allow you to play with different pricing plan numbers and observe the effect on your profit. It’s simple, but it should give you a general guideline.
- If you’re going to monetize with ads, make sure you have a way to sell these ads. You will probably need a fulltime ad-sales person. Don’t expect to just slap on some Google Ads and become profitable.
- Use promotion codes to get users to upgrade from free to paying plans. Whenever we offer DropSend users 50% off their first month, we see a huge amount of upgrades.
The best advice I ever got on pricing was from Jason Fried of 37signals. I ran our pricing structure by him and he had a quick think. After a moment or two he said “Make sure your free plan doesn’t give away too much. Because if no one upgrades, you’re in trouble.”
If you decide to offer a free plan, only give your users a taste to get them hungry.
I’ve decided to share the percentage breakdown of paying users for DropSend so that you can see a real-world example:
- $5/mo plan: 13% of total revenue
- $9/mo plan: 17% of total revenue
- $19/mo plan: 20% of total revenue
- $99/mo plan: 50% of total revenue
So are you financially viable?
If you were able to able to answer the three vital questions and you’ve chosen a monetization model that puts your cash flow spreadsheet in the black, then you’ve got a damn good chance of surviving and becoming profitable.
Please feel free to share any lessons you’ve learned while building your web app or challenge some of the points I’ve made.
Next time …
In the next installment of Web Apps 101, I’ll share valuable tips on funding your app, building a successful team and project management.
This post was written by Ryan Carson, the Director of Carson Systems, a web application and event company based in England.
“You should never plan on being acquired. ”
Why? Just because you are having a hard time unloading DropSend doesn’t mean you should shell out this drivel.
oh boy.
Interesting article - this will get a truckload of comments and incite some debates.
Great Article, I hope you blog more often here ’cause Arrington is not up to the mark any more. (No offence Michael)
totally on point with your post.
“I believe that some of the best apps come from meeting your own needs.”
Nothing like eating your own food, indeed. Just be sure that your taste is shared by someone other than yourself
The 1st post was a bit weird but really…who is ryan carson to even write this? You need a successful app to talk about what it takes to have a successful app….This probably would have been better written by Jason Fried or anyone that has made ’socially acceptable’ level of success not your own moral succcess..
I just dont get this wisdom from someone that hasn’t had much luck building succcesful apps…maybe stick to articles about successful events..that seems to be what he is known for….sure there are some valid no brainer points in this article…please stop the tips…no one wants their app to end up like amigo or dropsend…
Who are you? A web expert? Stop kidding yourself
“Building a web app is easy. Building a successful and profitable web app is where most people fail.”
- great principle and a cautionary advice as well. maybe ryan has numbers on this? like 80% of wep app companies fail in their first 2 years?
Thanks Ryan! Now I know “almost” exactly what I need to know to be successful.
Seriously, whats with this spew of every valley cliche’ muttered in the past 10 years?
If it was that simple, wouldn’t everyone have a hit on their hands? Puhlease…
And Mike, why’d you delete your confession?
http://flickr.com/photos/ault/431162403/
Very nice post. I eagerly await future posts by Ryan.
I must say I don’t really like them mixed in with my standard TC though.
So, when does Ryan get his own TC-affiliate blog?
Thanks for the insights.
Gee, Ryan makes it so simple! Ryan, have you replicated this model a few times?
Overall, the article is useful. The advertising part is pretty lame thought — needs a lot more work.
Mike, is this blog a new Techcrunch experiment?
Comment # 1 - This is called truth in its purest form. He is a self-proclaimed clever ass. Who the hell speaks as an expert in his own organized event?well…carson does… he let michael speak as an expert at fooa so michael let him speak as an expert. In both cases, the losers are attendees of fooa concert and reader of techcrunch(and not them) that they paid for the concert & got nothing and they typed for the url http://www.techcrunch.com and got this crappy article.
Comment # 4 : Mike, You know you suck and you know your bad days are near. That’s why you brought Carson here
We come for other writers as well. It’s just that we have to wait till they get out from techcrunch.com and start their own crunchyweb.com 
Why is everyone hell bent on humiliating the TechCrunchers today!?
Well written article and the stuff over at his Blog is an interesting read too, although like this article it’s mostly lacking in much actual substance beyond stating the patently obvious.
There was one post there when they were trying to sell DropSend where they divulged it’s revenue. Basically it’s revenue is peanuts, so the article, although of value is not specifically written from the viewpoint of actually having a successful web application.
But, assuming a well created useful app - the key factor is marketing it. RC is getting his name about & his blog on here won’t hurt - so Bravo to him on that.
This post sounds oh so logical. Unfortunately this type of analysis only leads to me-too businesses! This is the typical over “mba’ing” of a bizz plan that arrington resents.
Do you really think that ebay, yahoo and google would have stood your cold logic in their early days? I don’t think so.
Especially this: “Search for terms that are related to your idea. If there’s a lot of online activity about it, you’ve got a good chance” is directly opposed to the reality imo.
Btw, if it is only a three-point plan, then every Tom, D*ck and Harry will be an Internet entrepreneur today…
whatever a bore…
My first thought also was - who is this guy?
I’d like to read a post like this written by Reid Hoffman (SocialNet, LinkedIn), Joel Spolsky (FogBugz, Copilot), or, basically, anyone listed here:
http://www.venturevoice.com/library.html
(I highly recommend VentureVoice - Go Greg Galant!)
TechCrunch, Inc. should hire him yesterday.
Wow, to half the comments so far: don’t you people have anything better to do than to spread hate (without even having the guts to use your real name)?
Try spending your time putting a positive message into the world and it just might come back to you.
Damn - lighten up, people.
Geez Louise thanks for all the helpful comments. He asked you guys to challenge his points, not take pot shots at his life.
People can learn by making mistakes, too, you don’t have to have the best company in the world necessarily to give advice.
I liked the article, half the comments are worthless, but I’ve read much, much worse, and I will look forward to next time.
‘In this new series of articles, I will share valuable strategies and tips for building successful web apps. I’ll be covering everything from powerful marketing strategies, how to build a quality team, tips for great customer support and finally, exit strategies.’
Sorry Ryan, this was my exit point. I put your article through the humbug detector in the top half of my head and it came out like this
In this old series of adverts, I will share useless strategies and tips for building unsuccessful web apps. I’ll be covering nothing from weak marketing strategies, how to build a rubbish team, tips for bad customers support and finally, stategies for getting nowhere.’
I read Michael Arrington.
What a lot of negativity for a clearly sensible article. Surprising as its simple and sensible advice and most web2 companies won’t follow it, but instead produce marginal products we don’t need
Not sure why people post such negative comments, if you don’t like the articles don’t read them or better still post something better. All advice from someone with Ryans experience is worth listening to, and by the way I’m sure he’s capable of fleshing this article out, but how much depth do you want in a blog article? Keep up the good work Ryan.
The article was obviously ironic; having a laugh at those who do think setting up a fortune making web site is as easy as…. well, as easy as writing a lame article on how to make a fortune from your web site.
The comments are much more interesting and informative than the article. Is there really so much bitterness and petty jealousy out there that someone can’t even publish a few thoughts without being hailed as a charlatan?
Grow up and get a life.
wow tough crowd here today.
Great read Ryan
I don’t think this post is appropriate for the TC audience, who are mostly entrepreneurs and VC’s, not hobby-kit website business builders
Great article.
“I believe that some of the best apps come from meeting your own needs. If you ever catch yourself thinking, “Wow, I sure could use …” then it might be a brilliant web app opportunity”
Or you could just Google and find a solution, which is what most people do. I guess that explains DropSend.
Hey Ryan, when was the last time you “caught yourself thinking”
Yo Ryan.
They gettin at you man. Decent article. Altough you make good points, he truth is that they are common sense. Now why do I still think your article is ok? Because sometimes we need a third party to remind us of what we know but take for granted. You are reminding wentrepreneur2.0 the basics of building a successful venture.
Call me krazy but I still believe that PASSION, HUNGR and LUCK are equally as important as those technic&l and admin fundamentals.
A lot of people seem frustrated by the content of the article as it perhaps doesn’t meet their needs. You poor people. I mean, you’ve spent sod all for this information and it’s not what you wanted or you’ve heard it all before. It’s just not fair is it?
Ryan’s posted along similar lines before elsewhere so why is he repeating himself here? Obviously it’s not all due to altruism - he’s running a business and, well, part of his motivation for this post has to do with that dirty, filthy word - marketing. But I’m also sure he’s aware that a number of people will be reading this for the first time and will find it useful. If that’s not you - move along. You could even turn the computer off, go for a walk and get some fresh air. It’ll do you good.
A lot of strong opinions here. I enjoyed the article and thought it confirmed some of my own assumpttions about apps. Looking forward to the next one. All the people giving abuse - you need a hug or something.
How about having fun ?
It may sound trite, but to me this is THE single most important factor in all projects.
It it’s fun to work on, it’s not work - it’s play, and you’ll do it gladly…for long hours…without thinking about it.
If it’s fun for you, it’ll also likely be fun for other people. They’ll like it and it’ll take off.
I think all the readers here have enough to eat, so it’s not really ALL about the money, is it?
Time is short. Have fun or it can become as gruelling as a dead-end job at an insurance agency.
And as for monetization: if your expenses are real low, it’s not a problem - don’t get hung up on it. Just work on making your project great, which will bring Traffic. Traffic + advertising = monetization, and this takes care of itself.
How many companies are out there versus how many actually succeed in striking it rich through a buy-out? Very very few. Conversely there are many companies (37signals, Smugmug) making a killing doing exactly what Ryan has suggested.
Dreaming that your new disruptive Web2.0 AJAX social web app is actually going to make you super-rich is like a 14yo thinking he’s going to become the next David Beckham. Not going to happen.
Google, Yahoo and eBay’s apparent lack of a business plan in the early stages is smoke and mirrors: the companies are now all run by experienced execs with huge teams. They were not bedroom billionaires, and furthermore they were started by lucky and exceptionally talented people. You, dear reader, are probably neither and you should realise it sooner rather than later.
Here’s the big secret no one dares utter these days: the odds are against you. If this weren’t the case, VC’s would only ever have one company in their portfolio at a time… Think about it!
Well, I certainly learned something: that a lot of Techcrunch commenters are asses and jerks.
The lack of friendliness; the obsession with selling to big media companies against all common sense; the aggression towards good, but differing advice; the arrogance… It smacks of stressed mico-CEOs frustrated they’re going to miss the wave… and it’s all a bit too reminiscent of the end of the first bubble IMO.
I don’t know whether Ryan’s doing this for a marketing exercise, but so what if he is? Isn’t he entitled to? At least he’s saying positive things rather than slagging people off.
For that, here’s hoping that Ryan’s enjoying himself and still making a healthy income in 2010 when most of these miserable TC commentators are looking for IT admin jobs at Walmart!
[38] you got the point. where are the time when comments were at least worth to read…
Ryan’s article may be simple common sense but having sat through quite a few web 2.0 stories surrounded by hundreds of IT brilliant hopefuls there are alot of people out there believing the model is IDEA, WEBSITE, BIG AUDIENCE, ADSENSE and a call from Google in month 19.
Thats it! Thank you for helping me to get my ideas organized!
is that a fooa ad on the right? shouldnt there be a disclosure that he is either an advertiser or bartering?
nice article btw - seems in depth
Comments in blogs can be over the top, but the ones here are negative for good reason:
1. Ryan is NOT a successful web app entrepreneur. Dropsend has struggled against better competition managed by people who focus 100% on their business. It just riles people when someone pontificates a “success plan” without the personal credibility to back it up.
2. The content of the blog was at best naive. There are better resources out there for this type of advice. Try http://www.burningdoor.com/askthewizard/ or http://blog.marketo.com/blog/ or http://www.startupping.com/.
3. The tone of the blog just pissed people off. Jeez Ryan you make it sound so easy. Should only take 3 months to become a gazillionaire. Time to quit my job.
Ryan, here’s one piece of advice you missed - FOCUS 100% ON YOUR CORE BUSINESS.
Hehe - this is the problem with letting every tom, dick (who seems to comment a lot) and harry write comments.
I consider myself an entrepreneur, and I highly value what Ryan has to say - he’s only human but this guy is on the right track - he’s more successful than me (at the moment
so I am going to glean whatever information I can from what he has to say.
If you dig a little deeper and look into Carson systems (the webapps (whether they are worth $500 mil or not) ), the FOxx events, the blogs etc. you can see that he (and the Carson team!) is doing something right, or he would’nt be here…
Little things like “working the 4 day week” really inspire me and it’s hard not to admire what the Caeson team are doing - who ever said that you had to either make $Billions or fail in this business?
The Carson team are on the way up and for whatever reason Ryan chooses to spread some knowledge around (sorry if you know it all already - I guess you must be a successful webapp owner billionaire - perhaps this is the wrong blog for you).
ps - Mike - I LOVE the way you have this love/hate relationship with your readers - I watch your Feedburner figures jump 10k a day or so so you also seem to be on the right track
needs to be fleshed out
Normally, I don’t comment but for this one, I will do it. I read Ryan Carson for quite a long time but I never found anything valuable in his writings.
He seems to be a nice guy but not very bright. If you have a look at his business, it’s not really successful and the adventure of Dropsend (selling Dropsend) is a bit dramatic. Concerning its events, like FOWA, the big announcements he promised were quite small. He talks a lot about efficiency but his results are rather average.
The main thing about Ryan is that he talks louder than other people so people listen to him. It’s like traders. The most brilliants don’t give their recipes. They give results. The average ones do it and build their business on the fact that average Joe will listen to them and buy their speech. And they will make money from them.
# 29 - Mike wishes!
this is the kind of post dreams are made of.
great article.
A good reminder of key business principles that are all too often forgotten online. Given Ryan’s background, the article is focused on a more traditional business model: build a product and sell it. But most successful web businesses are free for consumers but have a huge audience and make money on ads. The key behind success is user growth: viral marketing, etc, whatever it takes to achieve mainstream audience (those who “think “The Internet” is the blue “e” icon on their desktop”). Given the low cost of running a web app today, profitability is not really an issue. The key question should be: what ingredients should my web app have to achieve such user growth?
Sorry for the late reply - I live in the UK and we just woke up over here.
Wow! A lot of love and hate going on in the comments. I welcome the good with the bad - no worries
It seems that a lot of the negative comments fall into these categories:
Who’s this Ryan guy and why’s he qualified to write this article?
These tips are common sense, therefore worthless
So, here we go:
Point 1
I’m a 29 year old small business owner. I don’t have any formal business training, but I’ve managed to build a profitable web app (DropSend) and run a cash rich small business. Everything I’ve learned is from actually getting out there and doing it.
I offered to write the article for TC because I felt that some of the simple tips I’ve learned might be valuable for TC readers. I know they won’t be applicable to everyone, but with 300K+ readers, you can’t make everyone happy.
Point 2
I’ve spoken to a ton of folks who are building web apps. It’s shocking how many of them aren’t applying common sense business principles to what they’re doing. I know the article is fairly basic, but you’d be suprised how many people are ignoring these simple important points.
If you’re a hardened web business man, of course this article will be old news for you. The article isn’t aimed at you. I was hoping to shed some light on things for people who are new to the web app arena. Take it or leave it, it’s a free article
To everyone who supported me in the comments - thanks. Much appreciated
Everyone take a deep breath…
TechCrunch is a great resource for those heavily involved in business on a day to day business (VC’s, entrepreneur’s, etc) but this is also an unbelievable resource for people just getting into the business world.
I know a few years ago when I got into things I was clueless and a site like TechCrunch could have helped me a great deal. So, hats off to Ryan for posting this and to Michael for clearing this as it reminds us what we know and helps those getting into the business world.
thanks for the tipps
Whatever else is said, there is no doubt that this article jars with the tone and insight a regular techcrunch reader has come to expect.
Has their been a sudden shift in editorial policy?
If so, is Techcrunch still aimed at its traditional readership or is it angling for a new readership base?
The above article says that a promoter should ask questions like “Who is it aimed at?” and “Why will they use it?” when assesing its products potential in its target market.
We know Mike applies these basic principles in his sleep.
That said, Digg and Rojo readers love these kinda titles and the above post is likely to be widely read. I do hope this article fits into the category of cheap and cheeky publicity stunt.
I do hope it is not a sign of a reversal of editorial policy on quality.
One wonders if this has anything to do with the recent arrival of Heather Harde ex-Fox Interactive Media as new ceo of techcrunch? Nah. Hardly.
But one wonders if anyone or anything once exposed to the profitability of Fox can then possibly resist the siren call to dumb down?
Are we witnessing a temporary glitch or a permanent change?
If its a permanent change, let me the first to say.
“I For One, Welcome Our New Foxy Overlords… “
Amazing so many people are hacking on Ryan. Some people don’t know these ideas, some people do. If you are one of those that does understand these principles, be glad for that.
I disagree about some of his monetization comments. Some services don’t fall in to the “pay to use” or “advertising” model. In some cases, the service is a springboard for products (i.e. a free service tied to a unique product offering). While you absolutely should have an idea of how you are going to generate revenue, you don’t have to be tied to either charging for the use of your app or advertising.
On the flip side, charging for the use of your app is a great way to reduce the incidence of “Dead accounts” and increase stickiness.
Ryan, the article was a useless waste of time! - Love Simon
Ryan,
Nice post! One comment on the hire an ad salesperson….
From my experience & others I have talked to … until you have significant audience & impressions, it is very unlikely that any advertiser is going to buy your inventory directly.
That said, the ad networks are a great middle ground until you have enough impressions to make a salesperson work for you.
- Sean
PS - When are you coming to the US next? It was great to meet you at SXSW - will you be at Web 2.0 Expo?
I’d love to see a nice table showing how sites that have been generally viewed as successful do when put through the “checklist”…something like
youtube
plentyoffish
flickr
etc…
just taking youtube and plentyoffish…
youtube never had a clear plan for making money, to me they played a game of chicken with there cash and investors hoping some giant company would blink first and aquire the massive traffic ?
they flew in the face of common sense (the above article is common sense) all over the place
plentyoffish, non-funded, no marketing team
like someone said above, these are all common sense, and it is GREAT to be reminded about it, but not in some super preachy way.
Another thing I’ll through out, the number of people that have 2 or more hits under their belt is really small, again pointing out the fact that the magic is not so much that you followed the rules of ryan
Ryan, even I can’t come up with anything positive to say, and I’m the placating flake.
Kidding, but in all seriousness Ryan, I think you are taking a pretty serious risk when you choose to address an audience of aspiring - and in some cases successful - entrepreneurs in any kind of authoritarian tone. Moreover, I think equal or greater risk is taken when you try to pander blanket statement recommendations about making businesses successful. No matter how honest and noble your intentions, this kind of content inevitably comes off as platitudinous and begs criticism.
All of this being said, I don’t think the posts above are appropriately constructive or entirely fair.
Also, did I mention that I think you’re dressed very well tonight?
-Paula
Ryan,
“but I’ve managed to build a profitable web app (DropSend) and run a cash rich small business.”
I remember from one of your sites that you don’t include any salaries in your calculations of your companies profitability. Thats not realisitic. People should NOT do the same. It can’t just be sales-hosting=profit….If you actually added a respectable salary for yourself and a few other people like most startups of 3….it would be very not profitably..you have to agree…I think people should know that.
I’ve attended one of Ryan’s workshops; it was great to see an incredible lineup of speakers. You come away from those types of things pumped up and inspired after seeing the otherwise normal people that have had much success online (Digg, M. Arrington, the Flickr guys, etc).
At the same time, this Web 2.0 thing really is a huge house of cards in many regards.
Take DropSend’s revenue figures for example:
http://www.barenakedapp.com/dr.....hly-profit
Pushing $9k / month as of November 2006. Not too bad at all. But not earth-shattering either.
Like marketing legend Jay Abraham, I study many different industries to see what works in each and apply those principles in other industries (where the same marketing tactics are not widely used cross-industry).
Read up on the Internet marketing world if you are impressed by Web 2.0 figures. You will discover many, MANY entrepreneurs in that scene that regularly bank $1 million in a week during a new product launch. If you are impressed by $9k per month then I don’t know how you cannot be blown away by $1M in a week.
I’m currently developing a web app, so I have been doing a ton of reading and research on these topics, one of the best resources I have come across is a book called The Four Steps to Epiphany, written by Steven Gary Blank, a very successful software entrepreneur and professor at UC Berkeley. For all of you looking for more details and insights about the building a successful product, the book is a great resource.
Ryan’s points are simple but true, and when it comes down to it, business is not that complicated, but it requires a discipline and willingness to get outside of your head and into the lives of your users, and that is where most tech entrepreneurs fail.
Nice comeback, Ryan… Cheers!
Alright - here’s my opinion on what Ryan put together here: it’s all pretty true regardless of his “track record”. Believe it or not, many many founders forget the key ingredients he mentions and instead dream the dream “build it and they will come”. (These happen to also be the people who are having all the fun running their little outfit.) We read about these startups and give another year and we’ll see many more web 2.0 startups jump into the DeadPool (the ones even worthy enough to mention). There are so many other “projects” that die before they launch and web 2.0 is extremely close to being commoditized; everybody’s got a startup in their back pocket!
Let’s also not forget that Mike started off “small” and we’ve learned to trust his judgement based on the material he’s put together over the years. He’s a professional “reviewer” with vested interest in EdgeIO (his startup). EdgeIO isn’t doing fabulous or anything but we still find his commentary interesting enough that we come back here regularly to read what he has next.
Profitability is one very hard thing for all these web 2.0 startups - the fact that he IS profitable says *a lot* about the business he runs and there’s also a lot to learn from his experience as well. (I find it much more interesting to read about his experience then *closed betas*.)
Roj
The haters are really missing the point. This advice is not rocket science but a lot of it is important to think about often, even for experienced people.
Every watch a great boxer? Between rounds his trainer might say “keep sticking the jab”. Is it because the a jab is rocket science? Is it because the great boxer doesn’t know what a jab is? No - It’s because it always helps to periodically make sure you’re taking care of fundamentals.
The article is not supposed to mean “just follow these steps to success”. Instead it’s supposed to mean “think about how the fundamentals can increase your chances of success”.
I don’t even know who Ryan is but clearly he doesn’t deserve such bitterness for trying to help people out with some basics.
LTG
I thought TechCrunch was read by like minded people, seems not for the most part. More like a bunch of sorry, bitter nobodies.
Maybe you should get off your backsides and build your own web apps, rather than hoping for some “how to make a $1M without getting off my backside” articles. Or if that’s to much how about providing some good content if you think this isn’t up to scratch? You don’t pay for this so be grateful!
Ryan Carson has become to Techcrunch what Jon Katz was to Slashdot before he got famous for writing about dead dogs. I would suggest that Techcrunch should next implement a filter feature that can block articles by author. When Slashdot did that, I could block Jon Katz’s idiocy and my Slashdot user experience improved. It would be nice to come to Techcrunch and know that Ryan’s baseless self-promotion would not appear on my screen.
By the way, fumbling around playing entrepreneur is not harmless. Blog posting potential buyers during the Dropsend attempted sale fiasco showed some true colors. Ryan not only doesn’t get business, he doesn’t get how to relate with other human beings in a considerate way.
…and anyone who listened to John Wooden–considered by most who know to be one of the greatest, smartest, most successful coaches in the history of basketball with what–10 or 11 NCAA chamionships…yet who was a very average player that no one paid any attention to in his playing days (and who would have been laughed off the court had he dared say then that he wanted to be a successful coach; telling others how to play the game)–must have been real fools for doing so…
Good ideas and information should not be discounted merely because the speaker/author was never (or at least is not yet) themselves a monster success who’s made the front page of the WSJ or NY Times…value can come from anywhere…anyone…and at any time.
Why not pay attention to that which you need, find interesting, and enjoy…and simply ignore, turn the page, or scroll past that which you don’t…doing so without resorting to personally attacking others…
I’m with Ryan….the ‘Dropsend attempted sale fiasco’ was truly insightful, a rare glimppse into the sort of back and forth most of us never see or experience.
There is a lot to be gained by speaking your mind on issues like this.
As for this particular article, its useful to be reminded of the basics.
Thanks again.
Great post Ryan,
These are very common sense ideas. I like your point that it is much easier to make an app if you are the target audience. This is very true.
A huge lesson that I learned is that you have to make something that makes your life easier. If you are developing a way to send thank you notes through the internet. You have to make sure that it is easier to do this than to write them out by hand. Everyone is looking for convenience and ease of use. If it doesn’t make things easier than you are wasting your time.
“I believe that some of the best apps come from meeting your own needs.”
Agreed, I’m building an application for my company that we think may get spun out as a product in it’s own right, but for now I’m building it because we need and use it.
Nice fun to read article. Especially the comments
In my opinion, “hiring ads salesman” option is not criticized enough.
Start up doesn’t really need hiring salesman, because Google AdSense provides way better price/performance ratio for small web company.
I’ve been reading Ryan’s blog for quite awhile. The whole Amigo road trip was fascinating from my point of view because I don’t personally dont’ have the testicular fortitude to try anything like that on my own, let alone bare my soul to the world about my experience, good or bad.
I’d like to see some of you no-talent-a**-clowns have the guts to write an article on your experiences instead of spreading more venum. If it’s not constructive, leave it alone instead of trying to bring others down with you.
Thanks for the article, Ryan. Keep up the good work.
As somone with a bank of “great” ideas, not sure which one to commit to if any, the most valuable service/advice would be a personalised but confidential discussion about a project before committing a considerable amount of time/money to it, but a discussion with knowledgable/experienced people - such as the techcrunch readership. Any forum for doing that that isn’t public?
Some good and valid points.
We, MuSMo, are following a very similar route to become “successful”. We have actually just publicise our online survey, and hope to see what sort of responses we get. We are already in our final phase of our specifications/requirements. Before we really start the application development process, we wanted to ensure ourselves that we are doing the “right” thing, hence the survey.
Personally, I haven’t seen any online surveys been done by startups lately. At least not publicised to tech communities and such. I may be wrong, but it’s a fundamental step to get to know your potential market.
I’m actually blogging on a similar series as well, when time permits of course.
i know i’m a little late here, but all the comments on this post were so negative i just had to say something (if you ever read this, michael).
1. i don’t think you suck at all. techcrunch is without a doubt my top must-read industry blog (and i think that’s true for a couple hundred thousand others…).
2. i like having outside entrepreneurs contribute their points of view, but i wish they would say who they are and how they’re related at the top of their posts.
Good lord, people.
Ryan’s built a solid and profitable app (might not pull in a ton of money, but it’s more than he spends). He takes a fairly businesslike approach to getting better at being a web business geek. He speaks at conferences, interviews and communes with lots of other successful web entrepreneurs. And he is almost certainly more successful AS AN ENTREPRENEUR than most of the haters.
He definitely has some wisdom to offer. And, even if he is relatively small potatoes compared to Flickr or 37s, a lot of business wisdom actually scales quite nicely.
I wish someone would create a wordpress plugin that adds a “Flag as Intolerably Rude” button/link to each comment.
Just got back from 300 (brilliant film, by the way). Time to respond to some more comments …
I’ll be in NYC in June - looking forward to it.
If you’re running a small web app business, that sentence should send shivers down your spine.
Sure, if you’ve got funding, want to gamble your savings or you’re a huge company, of course you can play the odds and see if you come up with a game-changer (which makes you billions). But for everyone else, a clear road to profitability is extremely important.
I’ve said this before, and I’ll say it again. YouTube got lucky. It could have just as easily ruined the founders financially.
Thanks! That was the point of the article. I wanted to start with some basic principles. I’ll be delving into more complex issues in future articles.
I guess you’re not understanding what’s going on at Carson Systems. We funded DropSend by running events and the events pay our salaries. We decided not to raise funding for DropSend because we wanted to run it as a side project.
This is why we don’t include our salaries in the DropSend monthly figures - there isn’t anyone full time on DropSend
I do about three hours of support a week.
This is a brilliant way for people to boot strap their ideas. Let your primary job pay your salaries and if the web app is successful, then you can start investing more time and money into it.
I never claimed it was earth-shattering
But why does it need to be in order to be considered successful?
Thanks mate!
Again, thanks.
I find it ironic that you consider my blogging about the failed DropSend-YouSendIt deal as harmful.
Every single person that I have spoken to has thanked me for shedding some light on what actually goes on behind the scenes during acquisition talks. Heck, it probably hurt me more than anyone else.
I also find your personal attack at the end kind of funny. I’m sure if you and I sat down and had a coffee/tea/beer in real life (not crazy blogging comment land) I’m sure we’d get along great - and probably have a laugh about all of this.
By the way, how can I “not get business” given the fact that I run a profitable and fun business? Weird.
I appreciate the support - thanks!
I think this post isn’t good for a number of reasons, all of which add up to justify some of the bad remarks. Not many of the negative comments here have been constructive, so I will attempt to add something.
First of all, the scope of this article is unrealistic and nothing more than a gimmick. With such a facetious heading the post had set out on the wrong foot. Here is a tip, there is no three-step plan to success. Those that believe that such thing exists are the same people who buy hair loss pills from an infomercial at 4am.
Second, this article attempted to tackle a broad range of topics and issues. Each of these topics require total coverage just to be good introductory material.
So after setting the bar so high, the actual article crashes in flames as poorly written sentences attempt to give the reader insight into each area as components to a definitive solution.
I was going to point out parts of this post that are bad advice, but I believe the overall construct is *very* bad advice, so lets leave it at that.
What I believe this post intends to be about is how to conduct market research and analyze the viability of a product. Further to that is potential revenue strategy/business model and as a component of that, a potential pricing strategy. I say potential because a business plan is dynamic.
Researching product viability isn’t about closing your eyes and finding the answer in your gut, nor asking your buddies - frankly usually it is trial and error. A revenue model isn’t a decision between advertising income or asking your users for money. Acquisition or sale is a proven exit strategy - ask anybody involved in domain or website trading.
Here are some resources, all from just two great writers, that do a good job of tackling the topics that this post is supposed to be about:
Ideas, Paul Graham - http://www.paulgraham.com/ideas.html
Organic VS Funded - http://www.joelonsoftware.com/.....00056.html
Start a Startup, Paul Graham - http://www.paulgraham.com/start.html
On Pricing, Spolsky - http://www.joelonsoftware.com/.....ckies.html
and a bonus: Economics in One Lesson - http://jim.com/econ/preface_new_ed.html
A good starting point to explore, learn and experiment.
It seems a lot of people commenting here on this thread need a reality check on what being an entrepreneur means. There are no shortcuts, nor quick guides. Building a successful business requires years of solid experience, total immersion in the task at hand and a solid understanding of every facet of business. There is no quick way to learn - and if you are relying on broad pseudo-strategy with no solid foundation in real world experience, then you will fail.
There is so much information out there now, and with blogs you have a great number of people who are both successful in their fields and very good at what they do sharing their knowledge.
I hope that we do see a series of articles on Techcrunch, but I hope the next installment is more targeted and specific and written by a specialist in that area. With a specialist in each area, even experienced entrepreneurs might get a chance to learn something and more importantly, contribute to the conversation.
“I’ve said this before, and I’ll say it again. YouTube got lucky. It could have just as easily ruined the founders financially.”
Ryan, you have no idea how venture capital, or how the financing process works, do you? ‘play the odds’, what the f**k, seriously. Please refrain from commenting, that whole section you wrote about YouTube, and much of what you wrote here, is insane.
****SOMEONE PLEASE LISTEN TO ME****
I have a genius of an idea that I need YOUR HELP in making a successful company. The site is called Blipd.com. Now my genius idea is patent-pending, and I do have a business partner and myself who are starting the company.
The idea will affect everyone if successful. That being said, I think I have another genius idea that I could share with you here that could potentially be a fun, profitable web 3.0 experiment for anyone who’s willing to help me.
What if we, as in EVERYONE takes the idea of a startup and makes it open source??? That’s right, an OPEN SOURCE STARTUP!!! This would mean, that the foundation of the company would be based on of course my idea/patent and basic business/marketing principles already defined, but the EXECUTION and IMPLEMENTATION of the idea as a company will be opened up to the world. In return, those involved would be able to be voted on/off based on public recommendations during the life of the company until IPO or Dead Pool. As a benefit for being apart of this open source startup initiative, those successful enough to provide value to the company’s success will get equity/revenue within some sort of open source like company equity/revenue pre-ipo fund based on how the public feels of their contribution and how the company can translate that value towards a measurement of success.
Remember startup the movie? The public made added their 2 cents on their success/failure AFTER the company failed. Current “reality” blogs etc… do not provide public input that affects the company, only commentary.
I don’t believe this has been done before and everyone who thinks they know a thing or two about having a successful startup should put their brain where their mouth is and really THINK about WHAT an OPEN SOURCE STARTUP could mean overall as an experiment in the human process to be something that matters in this world for the benefit of the world.
Contact me at gigaboy20 at yahoo if you’re interested in discussing this idea and making it happen for real. I haven’t discussed this with my partner but I think it’s a novel enough idea that in the age of user generated content, and the companies that spawn from managing that content, someone should flip the script on the company process itself, what if the world created it’s first company?
Am I the only one who can see value in this? Imagine the data that would be useful to all the entrepreneurs and businesses of the world. Join me!!!!!
Ryan:
Ignore most of these comments - it’s pure envy or simple cluelessness.
Good post Ryan, the information is as useful as it can be without actually having the experience you actually had or having an indepth conversation about it.
And all the advert haters etc etc there are two things here:
- This post isn’t a big ad for DropSend or Amigo or Carson Systems, it’s about the content
- Ryan actually seems to be a good publicist and if you were him, wouldn’t you mention your company? (especially if that’s what the article’s lessons are based on?!)
Yeah, I’m a little late here too, so everyone will be exhausted before they reach comment number 76, but I think some people are confusing Ryan’s unsuccessful attempt to sell DropSend, which to his credit has been openly documented, with the actual success of the web app itself. So what, he failed to flog DropSend but that doesn’t make it an unsuccessful web app. You see the difference here?
As the late great Bill Hicks once said: you need to squeegy your third eye! (boy I wish he were alive, he’d have tons of great material with the world the state it’s in - sadly, our loss)
My humble little blog is a toe-dipper, a cheap route to seed an idea for a web app idea I have, but don’t have the time to develop fully because I am a stay at home dad at this point in time. So far, so good.
Any pointers from people who’ve been there and done it, I will listen to. I don’t have any contention with Ryan’s article, apart from Adsense - which I think is evil!
I was going to Nirvana gigs when when Ryan was 11, so I aint too proud to listen to advice from people much younger than me and I am very much looking forward to Ryan’s next insightful article.
Decent article covering the basics of a service based app for beginners so in that sense, its useful.
Not sure where the hostility in some of these comments is coming from(all weaksauce anon posters no less) , I’m going to guess its mostly other founders bitter that someone actually suggested you need a real product, a real business plan, real revenue, and real users to actually make it rather than lame AJAX, ROR, useless widget#1,879,000 and a 8.99/month hosting plan with a blog that your 5 other pals visit….
Whoever Commenter #1 was, (it’s always the pricks that are anonymous), was full of shit.
If you’re building a web app with the intention of flogging it, you are guaranteeing yourself that you’ll sell it for the lowest possible price. And that usually means selling it to one of those company traders who will buy it, pimp it, and sell it on again.
It also means you’re not looking at the long road, you’ll never bother doing things like keeping a features list, cause you’ll be permanently lost in the dreamland. “I’ll be in Honalulu by then, so whats the point in developing”.
The mind set of “we’ll sell this” will usually net you a crappy unfinished product with a crappy price tag to go with it