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	<title>Back of the Envelope &#124; Jonathan Wegener's Technology/Marketing Blog &#187; media</title>
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	<link>http://blog.jwegener.com</link>
	<description>Jonathan Wegener's Technology/Marketing Blog</description>
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		<title>Building a Broken Product</title>
		<link>http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/</link>
		<comments>http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/#comments</comments>
		<pubDate>Thu, 29 Jul 2010 20:16:07 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[design]]></category>
		<category><![CDATA[ecommerce]]></category>
		<category><![CDATA[media]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=906</guid>
		<description><![CDATA[&#8220;More expensive and less functional.&#8221; That was the recommendation I had for a friend&#8217;s startup. Why? The free version of the company&#8217;s product works too damn well. You&#8217;ve probably heard of Freemium. There&#8217;s also Previum and a dozen other variations I&#8217;m sure. The exact differences aren&#8217;t really worth getting into because at the core is this: Something&#8217;s gotta break. [...]]]></description>
			<content:encoded><![CDATA[<p><strong><a href="http://www.flickr.com/photos/nokapixel/3054051640/"><img class="alignleft" style="margin-right: 10px;" src="http://farm4.static.flickr.com/3282/3054051640_a3486ed588.jpg" alt="" width="500" height="333" /></a>&#8220;More expensive and less functional.&#8221;</strong></p>
<p>That was the recommendation I had for a friend&#8217;s startup. Why? The free version of the company&#8217;s product works too damn well.</p>
<p>You&#8217;ve probably heard of <a href="http://avc.blogs.com/a_vc/2006/03/the_freemium_bu.html" target="_blank">Freemium</a>. There&#8217;s also <a href="http://www.sneakerheadvc.com/2010/05/18/previum-the-evolution-of-freemium/" target="_blank">Previum</a> and a dozen other variations I&#8217;m sure. The exact differences aren&#8217;t really worth getting into because at the core is this: <strong>Something&#8217;s gotta break. And someone&#8217;s gotta pay to fix it.</strong></p>
<p>But breaking a product is harder than it sounds. Products can break to different degrees and along many different dimensions. <strong>Time is one such dimension</strong>. With trial software, the user is given a few weeks to use the product.  If they like it, they continue using it. Rdio gave users three days to try it out. Balslamiq gives seven days. Basecamp gives 30 days. As you can see the <em>degree</em> of this breakage varies widely.</p>
<p><strong>Another related dimension is usage</strong> in which the product breaks after being used a certain number of times. Or when a certain amount of use is reached. For example, Pandora breaks after 40 hours of usage in a month.</p>
<p>But most products are broken along <strong>some feature dimension</strong>. AirVideo converted me into a paying user in (a ridiculously fast) five minutes by making the product so broken that it demonstrated that the technology worked and was awesome, but I couldn&#8217;t browse all my videos making the product essentially unusable. And sometimes products are <em>entirely</em> broken, which is to say they exist entirely behind a paywall. Many dating websites continue to operate like this.</p>
<p>There&#8217;s a dizzying number of  dimensions in which most products can break. It&#8217;s limited only by a product&#8217;s feature set, a product&#8217;s complexity and your creativity. Most products are simultaneously broken along several different dimensions, to varying degrees of breakage, and at different pay points.</p>
<p><a href="http://www.flickr.com/photos/vol-au-vent/2102834305/"><img class="alignright" style="margin-left: 10px;" title="Screen shot 2010-07-29 at 3.48.49 PM" src="http://blog.jwegener.com/wp-content/uploads/2010/07/Screen-shot-2010-07-29-at-3.48.49-PM.png" alt="" width="397" height="264" /></a></p>
<p>Building a product that&#8217;s <em>correctly broken</em> requires a strong product sense and a willingness to experiment and charge money. Limit the free version too much and you lose users which could potentially be great sources of word of mouth marketing. Give too much away, and you&#8217;re cannibalizing your own products and shooting yourself in the foot. <strong>It&#8217;s a fine balancing act for sure!</strong></p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
<li><a href="http://blog.jwegener.com/2010/05/12/iphone-android-blackberry-app-download-compare/">Comparing Android, Blackberry, and iPhone App Sales</a></li>
<li><a href="http://blog.jwegener.com/2010/04/06/golden-skyscrapers-and-minimal-viable-products/">Golden Skyscrapers and Minimal Viable Products</a></li>
</ul><br />
]]></content:encoded>
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		<title>Do You Speak the Language of Visual Design?</title>
		<link>http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/</link>
		<comments>http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/#comments</comments>
		<pubDate>Tue, 18 May 2010 18:19:15 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Uncategorized]]></category>
		<category><![CDATA[design]]></category>
		<category><![CDATA[media]]></category>
		<category><![CDATA[products]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=679</guid>
		<description><![CDATA[…or “Why You Need a Graphic Designer” The book&#8217;s title caught my eye instantly.  &#8221;Visual Literacy&#8221;  Intriguing.  I took it home, and over the next few days, I learned just how blind I was to the art of visual communication. Completely illiterate. The book begins with exercises: &#8220;By using four black squares of the same [...]]]></description>
			<content:encoded><![CDATA[<p><img class="size-full wp-image-876 alignright" title="Screen shot 2010-05-18 at 1.34.51 PM" src="http://blog.jwegener.com/wp-content/uploads/2010/05/Screen-shot-2010-05-18-at-1.34.51-PM.png" alt="" width="116" height="325" /><em>…or “Why You Need a Graphic Designer”</em></p>
<p>The book&#8217;s title caught my eye instantly.  &#8221;<a href="http://www.amazon.com/Visual-Literacy-Conceptual-Approach-Graphic/dp/0823056201" target="_blank">Visual Literacy</a>&#8221;  Intriguing.  I took it home, and over the next few days, I learned just how blind I was to the art of visual communication. Completely illiterate.</p>
<p>The book begins with exercises: &#8220;By using four black squares of the same dimension, create a graphic image that best expresses the meanings of each of the following words:</p>
<p>order</p>
<p>increase</p>
<p>bold</p>
<p>congested</p>
<p>tension</p>
<p>playful</p>
<p>I gave it my best shot and then flipped the page, revealing sample answers from students at New York&#8217;s School of Visual Arts. Suddenly I realized just how illiterate I was.</p>
<p><a href="http://blog.jwegener.com/wp-content/uploads/2010/05/Screen-shot-2010-05-18-at-1.39.19-PM.png"><img class="size-full wp-image-881 " style="margin-left: 200px;" title="Screen shot 2010-05-18 at 1.39.19 PM" src="http://blog.jwegener.com/wp-content/uploads/2010/05/Screen-shot-2010-05-18-at-1.39.19-PM.png" alt="" width="284" height="169" /></a><br />
I&#8217;ve since appreciated design more.  To further explore the importance of graphic design and visual communications, I dug up a few Exit Strategy NYC graphics.  I show our initial design attempts (done by yours truly).  At heart I&#8217;m a science/tech geek, so I&#8217;ll explain my inherently scientific thought process.  And then I show how a professional designer approached the same problem.</p>
<p>Exit Strategy Fans: enjoy this behind the scenes look!</p>
<p><strong>Train Illustration.  How I approached the problem:</strong> Exit Strategy NYC shows subway riders which train door to use.  So each door needs an &#8216;on&#8217; or &#8216;off&#8217; state.  The MTA&#8217;s trains can be 10 cars, with 4 doors in each car.  That means 40 doors in a train.  We want the train to run vertically on the iPhone screen which is 460px high (it&#8217;s 480px minus 20px used by the time/battery/service strip at the top).  So dividing 460px by 40 doors means each door gets about 11px of space to indicate on or off.  With padding, there&#8217;s probably 5px of height for each door and 5px in between the doors.</p>
<p><strong>Where I got stuck: </strong>5px for a door isn&#8217;t large enough to stand out, even if it&#8217;s red and a few extra pixels wide.</p>
<p><strong>How a graphic designer solved it: </strong>By making the train have a &#8216;slant&#8217; to the side which increased the swatch of the door, allowing the red color to &#8216;pop&#8217;.  Also she made it 3D and beautiful.</p>
<p><img style="border: 0px initial initial;" title="exitstrategydiagram" src="http://blog.jwegener.com/wp-content/uploads/2010/03/exitstrategydiagram.png" alt="exitstrategydiagram" width="700" height="384" /></p>
<p><strong>Splash screen.  How I approached the problem: </strong>We wanted to communicate subway transit combined with the notion of exiting quickly. Inspired by an &#8216;exit&#8217; sign, I attempted to overlay a transit like system on top of it. It&#8217;s hideous.</p>
<p><strong>Where I got stuck:</strong> Everywhere! How could we possibly communicate something as intangible as &#8220;Which is the correct train door?&#8221; while keeping a transit theme.  Time to call in an expert.</p>
<p><strong>How a graphic designer solved it:</strong> Sheer brilliance.  The zig-zag of the colored lines communicates subway lines.  These lines dump out at a subway door.  The &#8216;correct&#8217; door is open with a silhouette of a running guy.  An arrow helps indicate that <em>this</em> is the right door. The entire image is done with bright and bold colors.</p>
<p><img style="border: 0px initial initial;" title="exit-strategy-logos" src="http://blog.jwegener.com/wp-content/uploads/2010/03/exit-strategy-logos.png" alt="exit-strategy-logos" width="544" height="417" /></p>
<p><strong><span style="font-weight: normal;">So if you&#8217;re wondering whether you really *need* that graphic designer &#8212; always lean towards &#8216;yes.&#8217;  They&#8217;ll bring a perspective to the product and the messaging that will pay for itself many times over.</span></strong></p>
<p>Readers &#8212; have any embarrassing early design of <em>your</em> products you wish to share?</p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/15/please-dont-come-to-my-birthday-party/">Please *Don&#8217;t* Come To My Birthday Party Tonight</a></li>
<li><a href="http://blog.jwegener.com/2010/05/12/iphone-android-blackberry-app-download-compare/">Comparing Android, Blackberry, and iPhone App Sales</a></li>
</ul><br />
]]></content:encoded>
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		<slash:comments>2</slash:comments>
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		<title>Economy of Taps and Smart iPhone App Design</title>
		<link>http://blog.jwegener.com/2010/03/24/economy-of-taps-iphone-app-ui-design/</link>
		<comments>http://blog.jwegener.com/2010/03/24/economy-of-taps-iphone-app-ui-design/#comments</comments>
		<pubDate>Wed, 24 Mar 2010 19:05:26 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Platforms]]></category>
		<category><![CDATA[User Experience]]></category>
		<category><![CDATA[media]]></category>
		<category><![CDATA[products]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=748</guid>
		<description><![CDATA[Good interfaces should be designed around an economy of clicks. Or in the case of the iPhone, an economy of taps. Put simply: apps should allow users to achieve key goals with as few finger taps as possible. Exit Strategy NYC&#8217;s extremely simple interface asks only three key pieces of information: 1) What subway line [...]]]></description>
			<content:encoded><![CDATA[<p>Good interfaces should be designed around an economy of clicks. Or in the case of the iPhone, an <strong>economy of taps</strong>. Put simply:<strong> apps should allow users to achieve key goals with as few finger<img class="alignleft size-full wp-image-746" style="margin-right: 10px; margin-top: 5px;" title="Screen shot 2010-03-24 at 2.25.48 PM" src="http://blog.jwegener.com/wp-content/uploads/2010/03/Screen-shot-2010-03-24-at-2.25.48-PM.png" alt="" width="329" height="302" /> taps as possible.</strong></p>
<p><a href="http://www.exitstrategynyc.com" target="_blank">Exit Strategy NYC&#8217;</a>s extremely simple interface asks only three key pieces of information:<br />
1) What subway line are you riding? (tap the line&#8217;s icon)<br />
2) What subway station are you going to? (tap the station)<br />
3) What is your direction of travel? (tap &#8216;uptown&#8217; or &#8216;downtown&#8217;)</p>
<p>The app then shows the platform diagram for this station. <strong>Three taps</strong> &#8212; that&#8217;s it!  <em>In and out</em> in fewer than ten seconds. Compare this to the <a href="http://www.youtube.com/watch?v=mKieZxfIQhs" target="_blank">Tube Exits interface design</a> (Tube Exits is the London equivalent of Exit Strategy NYC.) The user has to tap over a dozen times just to get the same information!</p>
<p>One of my favorite apps,<strong> <a href="http://www.foursquare.com">Foursquare</a>, took a step backwards in their   latest update.</strong> Previously you  could check in with two taps: once on  the  venue, and once on the  &#8216;check-in&#8217; button. Easy Peasy. But the  latest  update added an additional  step after the &#8216;check in&#8217; button. <strong>This   change added no  functionality, only friction.</strong></p>
<p>If you&#8217;ve ever played the Settlers of Catan iPhone app, you&#8217;ve seen another  worst case scenario. Users must tap a tiny &#8220;Continue&#8221; button every time  the next player&#8217;s turn comes up.  It&#8217;s unnecessary and it&#8217;s frustrating.<img class="alignright size-medium wp-image-724" title="photo (1)" src="http://blog.jwegener.com/wp-content/uploads/2010/03/photo-1-200x300.jpg" alt="photo (1)" width="200" height="300" /></p>
<p><strong>Using an app with poor tap economy is like  trying to run a  marathon  in the   ocean.</strong> You exert much more effort and get nowhere fast.<strong> </strong>There&#8217;s too much friction. Tapping is mentally taxing, especially when it lands users on an entirely new screen. The user must review this new screen, <em>then</em> figure out which elements are interactive, <em>then</em> decide which one will help achieve their goal, and <em>then</em> tap again! Each additional screen/tap shoves one more roadblock  between the user and their end goal.</p>
<p><strong>The best services let users do more by doing less</strong>. This makes users feel <strong>powerful</strong>.  Have you ever used Amazon&#8217;s <a href="http://www.amazon.com/gp/help/customer/display.html?nodeId=468480" target="_blank">one-click checkout</a> to place an order?  If not, <em>please </em>try it.  It&#8217;s <img class="alignleft size-full  wp-image-751" style="border: 0px solid black; margin-right: 10px;" title="Screen shot 2010-03-24 at 2.59.56 PM" src="http://blog.jwegener.com/wp-content/uploads/2010/03/Screen-shot-2010-03-24-at-2.59.56-PM.png" alt="" width="167" height="66" />thrilling to use! Similarly, Griffin&#8217;s iTalk app features a <em>giant</em> &#8216;record&#8217; button that feels magical. With a single tap, the user can start recording because the app  picks <strong>smart defaults and stays out of the way.</strong><strong><br />
</strong></p>
<p>The only time having an extra tap makes sense is when the alternative is worse: a cluttered user interface. Good UIs balance which elements are shown and which are hidden. Consider Facebook&#8217;s decision to add the grid button in the upper left corner:</p>
<p><img class="size-full wp-image-689 alignright" title="Screen shot 2010-03-24 at 1.30.11 AM" src="http://blog.jwegener.com/wp-content/uploads/2010/03/Screen-shot-2010-03-24-at-1.30.11-AM.png" alt="Screen shot 2010-03-24 at 1.30.11 AM" width="319" height="112" /></p>
<blockquote><p>Economy [of taps] is always a motivating factor, but the grid adds an extra tap [because you need to press the grid button] versus the full-time tab bar. This was a compromise I felt was necessary. There&#8217;s always that balance between screen clutter&#8211;adding tabs&#8211;and the number of taps.</p></blockquote>
<p>-Joe Hewitt <a href="http://books.google.com/books?id=U6DEkhP1FooC&amp;lpg=PA26&amp;ots=vGfNu3u8mv&amp;dq=%22economy%20of%20taps%22%20chris%20dannen&amp;pg=PA26#v=onepage&amp;q=&amp;f=false" target="_blank">Quoted</a> in Chris Dannen&#8217;s <a href="http://www.amazon.com/iPhone-Design-Award-Winning-Projects-Definitive/dp/143027235X" target="_blank">iPhone Design &#8211; Award Winning Projects</a></p>
<p>At the heart of many apps is a <strong>single core goal</strong> that your users hope to achieve &#8212;  repeatedly. For Exit Strategy NYC it&#8217;s retrieving information.  For iTalk it&#8217;s recording audio. For Foursquare it&#8217;s checking in. For Amazon it&#8217;s purchasing items.  <strong>Don&#8217;t make your users run in the ocean. </strong><strong>Remove as much friction as possible.</strong><strong> </strong><strong>Let them fly in the sky! </strong><strong></strong>The quicker the user can perform their goal, the better they feel about themselves.  And the better your product makes them feel, the more  they&#8217;ll fall in love.</p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
<li><a href="http://blog.jwegener.com/2010/05/12/iphone-android-blackberry-app-download-compare/">Comparing Android, Blackberry, and iPhone App Sales</a></li>
</ul><br />
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		<slash:comments>4</slash:comments>
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		<title>Location, Location, Location: The Hyperlocal &#8216;Moment&#8217; of Awe</title>
		<link>http://blog.jwegener.com/2010/03/11/location-location-location-the-hyperlocal-moment-of-awe/</link>
		<comments>http://blog.jwegener.com/2010/03/11/location-location-location-the-hyperlocal-moment-of-awe/#comments</comments>
		<pubDate>Thu, 11 Mar 2010 19:45:45 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Yelp]]></category>
		<category><![CDATA[life]]></category>
		<category><![CDATA[local]]></category>
		<category><![CDATA[media]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=636</guid>
		<description><![CDATA[Every week the New York Times seems to run an article about Foursquare, the redhot mobile game. Most has been technology press, but one NY/Region piece stood out as especially interesting. Beyond Twitter: An App That Lets You Truly See City is written by a non-technology columnist and describes how the &#8216;tips&#8217; feature of foursquare opened the writer&#8217;s [...]]]></description>
			<content:encoded><![CDATA[<p>Every week the New York Times seems to run an article about Foursquare, the redhot mobile game. Most has been technology press, but one NY/Region piece stood out as especially interesting. <a href="http://www.nytimes.com/2010/02/20/nyregion/20bigcity.html" target="_blank">Beyond Twitter: An App That Lets You Truly See City</a> is written by a non-technology columnist and describes how the &#8216;tips&#8217; feature of foursquare opened the writer&#8217;s eyes to the world around her:</p>
<blockquote><p>&#8230;staring at my iPhone, the city right outside the window suddenly had voice, personality, opinion. Notes started pouring in, bite-size songs of praise about people and places&#8230;&#8221;</p></blockquote>
<div id="attachment_643" class="wp-caption alignleft" style="width: 310px"><a href="http://www.nytimes.com/2009/04/13/technology/start-ups/13hyperlocal.html?_r=1"><br />
<img class="size-medium wp-image-643" title="hyperlocal" src="http://blog.jwegener.com/wp-content/uploads/2010/03/hyperlocal-300x197.jpg" alt="Minh Uong/The New York Times" width="300" height="197" /></a><p class="wp-caption-text">Minh Uong/The New York Times</p></div>
<p><strong>I love it!</strong> What a perfect description of that magical moment many of us have experienced &#8212; when you suddenly &#8216;get&#8217; hyperlocal and realize that <strong>these nerdy webpages and mobile apps can literally change the way you interact with your own neighborhood,</strong> transforming the cement jungle into a friendly playground ripe for exploration.  The author elaborates on the feeling:</p>
<blockquote><p>&#8220;&#8230;crack doors open that might otherwise be passed by, giving personality and accessibility to the surrounding blocks. To walk through the city eyeing your Foursquare tips is to realize just how little of it you ordinarily see.&#8221;</p></blockquote>
<p>My moment of awe came during a visit to San Francisco in 2007. With my WAP enabled phone in hand, I walked down the street googling the names of every restaurant I passed &#8212; my obsessive-compulsive way of picking a good one.  A website called Yelp.com consistently popped up at the top of the google searches, and although I had never heard of it, I found their information and reviews extremely valuable.  I suddenly realized the power of this technology: <strong>I could get more insight about a restaurant by Googling it than stepping foot inside.</strong></p>
<p>Back in New York, I graduated college and waved goodbye to Morningside Heights and moved into to a completely new neighborhood:  Hells Kitchen.  Again, I suddenly I found myself overwhelmed with choice!  I distinctly remember running cost-calculations in my head: &#8220;How much it would cost to try out every single restaurant on 9th Avenue?&#8221;  The answer?  <strong>Too much.</strong></p>
<p>And here&#8217;s where Yelp really shined.  Yelp was my insider guide for my new neighborhood.   I could literally <strong>zoom into a city-block and see every single business on the block listed</strong> &#8212; alongside details, reviews, and tips.  Suddenly I had a way to learn about those &#8216;off the beaten track&#8217; spots. Empire Tea and Coffee?  If it weren&#8217;t for Yelp, I&#8217;d have overlooked one of the best coffee places in the city.</p>
<p>Why are hyperlocal services so powerful?  Because there&#8217;s a high personal relevancy to the information they offer.   Steven Berlin Johnson (author and co-founder of outside.in) <a href="http://www.stevenberlinjohnson.com/the-pothole-paradox.html" target="_blank">sums it up well</a>:</p>
<blockquote><p>Say you&#8217;ve got a particularly nasty pothole on your street that you&#8217;ve been scraping the undercarriage of your car against for a year. When the town or city finally decides to fix the pothole, that event is genuinely news in your world.</p></blockquote>
<p>It&#8217;s news in your world and only your world!  By the way,<strong> If you&#8217;re not already getting a daily </strong><a href="http://everyblock.com" target="_blank"><strong>everyblock.com</strong></a><strong> newsletter, you should sign up</strong>.  The information you&#8217;ll learn is incredible.</p>
<p>Perhaps what&#8217;s most exciting is that existing news sites and reviews guides are just scratching the surface of what&#8217;s possible with hyperlocal information.  Friend-finders like Foursquare, Gowalla and Loopt are finally starting to take off. But cool startups are working on defining whole new hyperlocal categories too: Deals, Nightlife, and even Casual Encounters!</p>
<p>In the deals category for example, <a href="http://yipit.com/spotter/new-york/" target="_blank">Spotter</a> by Yipit uses the foursquare API to find deals at the places you visit!  The result is an <strong>incredible daily deal newsletter that&#8217;s custom-tailored to where you live, work, and hang out.</strong> In a different category, <a href="http://www.buzzd.com" target="_blank">Buzzd</a> and <a href="http://www.citysense.com/home.php" target="_blank">Citysense</a> are trying to track nightlife activity and tell you what&#8217;s &#8216;hot&#8217; around you.  And let&#8217;s not forget <a href="http://www.Grindr.com" target="_blank">Grindr</a>, an iPhone app which facilitate sexual encounters between gay men.  The service has over 500,000 users and on a given day 30% log on.  Incredible traction.</p>
<p>Hyperlocal has finally come of age.  <strong>And seeing it go mainstream is going to be really fun.</strong></p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/22/new-work-city-deserves-your-support/">A Home for the Homeless and a Desk for the Deskless: NWC Deserves Your Support</a></li>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
</ul><br />
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		<title>Think Palm and iPhone &#8216;Spyware&#8217; is Scary?  Try Google Android</title>
		<link>http://blog.jwegener.com/2009/08/20/iphone-spyware-google-android-worse/</link>
		<comments>http://blog.jwegener.com/2009/08/20/iphone-spyware-google-android-worse/#comments</comments>
		<pubDate>Thu, 20 Aug 2009 06:46:07 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Apple]]></category>
		<category><![CDATA[Pinch Media]]></category>
		<category><![CDATA[Platforms]]></category>
		<category><![CDATA[ecommerce]]></category>
		<category><![CDATA[media]]></category>
		<category><![CDATA[nextNY]]></category>
		<category><![CDATA[questionable conduct]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=501</guid>
		<description><![CDATA[Lions, Tigers, and Spyware on Phones, Oh My! Mobile spyware is the focus of the tech media&#8217;s latest frenzy. It started when a hacker discovered that the Pre sends back location data about users to Palm.  Next, a blogger &#8216;discovered&#8217; that certain iPhone apps also phone home.  The frenzy came to a head when ReadWriteWeb [...]]]></description>
			<content:encoded><![CDATA[<p><em> </em>Lions, Tigers, and Spyware on Phones, Oh My!</p>
<p>Mobile spyware is the focus of the tech media&#8217;s latest  frenzy. It started when a hacker discovered that the <a href="http://kitenet.net/~joey/blog/entry/Palm_Pre_privacy/">Pre sends back location data</a> about users to Palm.  Next, <a href="http://i-phone-home.blogspot.com/2009/07/pinchmedia-anatomy-of-spyware-vendor.html">a blogger &#8216;discovered&#8217;</a> that certain iPhone apps also phone home.  The frenzy came to a head when ReadWriteWeb published <a href="http://www.readwriteweb.com/archives/dear_iphone_users_your_apps_are_spying_on_you.php">Dear iPhone Users: Your Apps are Spying on You</a>.</p>
<div class="wp-caption alignleft" style="width: 410px"><a href="www.flickr.com/photos/gerlos/3119891607/" target="_blank"><img class="   " style="margin-right: 10px;" title="Mobile Apps sping on you" src="http://farm4.static.flickr.com/3059/3119891607_5c70175eac.jpg" alt="(from www.flickr.com/photos/gerlos/3119891607/)" width="400" height="266" /></a><p class="wp-caption-text">(from www.flickr.com/photos/gerlos/3119891607/)</p></div>
<p>This article focused on the NYC-based iPhone Analytics company Pinch Media. The issue? Pinch Media&#8217;s software allows  developers to learn <em>a lot</em> about their users: Apps with geolocation features can return information about the location of their users. Apps using <a href="http://developers.facebook.com/connect.php?tab=iphone" target="_blank">Facebook Connect</a> can even return demographic information (gender and age) about their users.</p>
<p>Of course, there&#8217;s no personally identifiable information here. It&#8217;s all aggregate anonymous information &#8212; and this has been <a href="http://www.pinchmedia.com/blog/pinch-media-user-privacy-and-spyware/" target="_blank">Pinch Media&#8217;s response</a> to the issue. Tracking <em>anonymous</em> information for benign purposes is analytics &#8212; not spyware. At the end of the day, developers simply don&#8217;t know all that much about their individual users. It&#8217;s not like they can identify them by name, right? RIGHT?</p>
<p>Well, um, on that note&#8230; <span style="text-decoration: underline;"><strong>we know the full name and location of each and every Android user with our app. </strong></span></p>
<p>How?!  Did we build in some sneaky spyware into <a href="http://www.exitstrategynyc.com" target="_blank">Exit Strategy NYC</a>?</p>
<p>Nope.  <strong>Google tells us.</strong> This information is part of the Google checkout process behind android app purchases.  <strong>Each app download contains the full name of the user:</strong></p>
<p><a href="http://blog.jwegener.com/wp-content/uploads/2009/08/androidpurchases1.gif" target="_blank"><img class="size-full wp-image-509 alignnone" style="border: 2px solid black;" title="androidpurchases" src="http://blog.jwegener.com/wp-content/uploads/2009/08/androidpurchases1.gif" alt="androidpurchases" width="654" height="160" /></a></p>
<p>Clicking on the order number reveals a more detailed page containing the billing city and zip code of the user:</p>
<p><a href="http://blog.jwegener.com/wp-content/uploads/2009/08/androidpersonalinformation.gif" target="_blank"><img class="size-full wp-image-512 alignnone" style="border: 2px solid black;" title="androidpersonalinformation" src="http://blog.jwegener.com/wp-content/uploads/2009/08/androidpersonalinformation.gif" alt="androidpersonalinformation" width="371" height="443" /></a></p>
<p>Creepy?  <strong>Absolutely</strong>.  A  google/facebook/linkedin search can reveal incredibly detailed information about every  android user with our  app. Furthermore, this information is pushed on us &#8212; I certainly didn&#8217;t <em>choose</em> to see this detail about our users!</p>
<p>Seeing this level of user information displayed was extremely alarming at first. But when you think about it, it&#8217;s really not  that surprising. Google Android purchases are processed through Google Checkout &#8212;  the same system that applies to e-commerce transactions.  Certainly I would need to know my customers&#8217; personal information if I were shipping a physical product.  Should digital purchases be any different?</p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/22/new-work-city-deserves-your-support/">A Home for the Homeless and a Desk for the Deskless: NWC Deserves Your Support</a></li>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
</ul><br />
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		<title>Debunking the Mythical iPhone Ad Rates</title>
		<link>http://blog.jwegener.com/2009/07/26/debunking-average-iphone-cpm-ad-rates/</link>
		<comments>http://blog.jwegener.com/2009/07/26/debunking-average-iphone-cpm-ad-rates/#comments</comments>
		<pubDate>Mon, 27 Jul 2009 04:55:40 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Apple]]></category>
		<category><![CDATA[Metrics]]></category>
		<category><![CDATA[PR]]></category>
		<category><![CDATA[iphone]]></category>
		<category><![CDATA[media]]></category>
		<category><![CDATA[monetization]]></category>
		<category><![CDATA[questionable]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=438</guid>
		<description><![CDATA[I don&#8217;t usually enjoy popping balloons, but there&#8217;s way too much hot air going around these days.  It&#8217;s time that somebody tells the truth about the current state of iPhone app advertising.  I hear too often from would-be iPhone app developers that making big bucks with ad supported apps is easy: Just stick in some [...]]]></description>
			<content:encoded><![CDATA[<p>I don&#8217;t usually enjoy popping balloons, but there&#8217;s way too much hot air going around these days.  It&#8217;s time that somebody tells the truth about the current state of iPhone app advertising.  I hear too often from  would-be iPhone app developers that making big bucks with ad supported apps is easy: Just stick in   some $30 CPM ads, sit back, and watch the money roll in!</p>
<p><img class="size-medium wp-image-444 alignleft" title="Picture 75" src="http://blog.jwegener.com/wp-content/uploads/2009/07/Picture-75-300x191.jpg" alt="Picture 75" width="300" height="191" />To understand why naive first-time developers have this mindset, you only have to turn to the figures being tossed out by the major iPhone ad networks.  Last summer, Admob was talking about <a href="http://vator.tv/news/show/2009-07-24-admob-making-big-money-on-iphone-subscribers">$30 CPM brand ads</a> and calling that &#8220;low end.&#8221;  Similarly, Medialets talks about their Dockers ads which paid in the <a href="http://www.businessinsider.com/more-shakeable-ads-coming-to-your-iphone-2009-5">$20-30 CPM</a> range.  Even in today&#8217;s tough advertising market, Admob company <a href="http://www.businessinsider.com/iphone-ad-rates-way-below-expectations-2009-6">continues to cite</a> rather high &#8220;$12 to $14 average CPM&#8221; figures.</p>
<p><strong>Ready for the brutal truth?  Most iPhone ads networks today pay around $0.50 CPM. </strong> In case you don&#8217;t know how to digest that statement, I&#8217;ve rewritten here in plain english: 1000 people have to look at your application&#8217;s ad just to earn you a measly 50 cents.  What about those $30 CPM figures?  They&#8217;re just marketing fluff.</p>
<p><strong>If you want the truth, ask the folks on the front line: actual developers</strong>.  Bo Wang&#8217;s <em>Galaxy Impact</em>, an ad supported app with over 160,000 downloads, <a href="http://awurl.com/liCiKM4Jo" target="_blank">showed an eCPM (effective CPM) of $0.23</a>.  App developer John Kelsey says he sees <a href="http://awurl.com/NZmJwKyIS#first_awesome_highlight" target="_blank">about $0.50 CPM.</a> Pinch Media CEO Greg Yardley&#8217;s &#8220;appstore secrets&#8221; presentation reports a typical CPM range of <a href="http://awurl.com/rSNmlgYej" target="_blank">50c &#8211; $2 CPM</a> (slide 24) and then in the comments section, Greg quotes developers saying <a href="http://awurl.com/ZI0bAw33i#first_awesome_highlight" target="_blank">ad rates had dropped to $0.38 CPM.</a> Another developer running CPC ads says he sees <a href="http://awurl.com/BTGuUEjD6#first_awesome_highlight" target="_blank">$0.01-$0.03c / click</a>.  The truth is that <a href="http://www.businessinsider.com/most-ad-funded-iphone-apps-wont-pay-the-bills-2009-6" target="_blank">&#8220;Most Ad-Funded iPhone Apps Don&#8217;t Earn Enough To Buy A Sandwich&#8221;</a><img class="alignright" style="margin-left: 10px;" src="http://polizeros.com/wp-content/uploads/2007/02/balloon-pop.jpg" alt="" width="150" height="267" /></p>
<p>Why the discrepancy?  Fill rate is partially responsible.  Even if a $30 CPM premium ad does exist, it&#8217;s not going to run in your app 100% of the time.  In fact, most of the time apps displays remnant (ie NOT premium) ad inventory.  As one developer <a href="http://www.techcrunch.com/2009/05/06/just-how-much-money-can-free-iphone-apps-make-quite-a-bit/" target="_blank">says</a> &#8220;NO ONE can maintain the fill rate at decent cpm&#8221;.</p>
<p>Additionally, every ad network wants to attract app developers bad.  Really bad.  <strong>So they pitch journalists with juicy stories of high CPMs and &#8216;case studies&#8217; on developers making sick amounts of money</strong>.  Greystripe gets a press piece penned about an &#8220;<a href="http://www.businessinsider.com/iphone-beer-pong-app-making-7000-a-month-from-ads-2009-7">iPhone Beer Pong App Making $7,000 A Month From Ads</a>.&#8221;  Adwhirl gets Techcrunch to write &#8220;<a title="Just How Much Money Can Free iPhone Apps Make?  Quite A Bit" rel="bookmark" href="http://www.techcrunch.com/2009/05/06/just-how-much-money-can-free-iphone-apps-make-quite-a-bit/">Just How Much Money Can Free iPhone Apps Make?  Quite A Bit</a>&#8221; which claims apps can make $5000 a day.  And Medialets highlights their $20-30 CPM <a href="http://www.businessinsider.com/more-shakeable-ads-coming-to-your-iphone-2009-5">Dockers ad</a>.  These are the exceptions rather than the rules.  <strong>It&#8217;s marketing as usual.</strong></p>
<p>The purpose of this post isn&#8217;t to point fingers at the ad networks or accuse anyone of lying.  I love ads and I love free apps.  And I love the entrepreneurial spirit in these impressive iPhone ad network companies.  But there&#8217;s an important message here for first-time app developers: if you&#8217;re considering quitting your cushy job to make $5,000 a day with a fart app, don&#8217;t do it.  Always run your <em>back of the envelope</em> calculations first, and <strong>don&#8217;t assume your app will get anything higher than a $0.50 CPM. </strong>Basing your assumptions on $30 CPMs will leave you high and dry.</p>
<p>As usual, readers, I love hearing your comments and questions.  So don&#8217;t be shy!</p>

<p><strong>Possibly Related Posts:</strong></p>
<ul>
<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
<li><a href="http://blog.jwegener.com/2010/05/12/iphone-android-blackberry-app-download-compare/">Comparing Android, Blackberry, and iPhone App Sales</a></li>
</ul><br />
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		<title>Part two: the business of SMS Couponing</title>
		<link>http://blog.jwegener.com/2009/06/25/part-two-the-business-of-sms-couponing/</link>
		<comments>http://blog.jwegener.com/2009/06/25/part-two-the-business-of-sms-couponing/#comments</comments>
		<pubDate>Thu, 25 Jun 2009 05:35:05 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Startups]]></category>
		<category><![CDATA[ecommerce]]></category>
		<category><![CDATA[local]]></category>
		<category><![CDATA[media]]></category>
		<category><![CDATA[monetization]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=382</guid>
		<description><![CDATA[(This is the second of a two part post.  The first part contains a profile of a startup.  This part contains numbers and analysis related to that startup.) First, some background.  I became interested in the mobile coupon business space a few years back when I started thinking about how mobile coupons could effectively be [...]]]></description>
			<content:encoded><![CDATA[<p><em>(This is the second of a two part post.  <em></em></em><em><a href="../2009/06/22/part-one-startup-spotlight-mobile-spinach/">The first part</a></em><em> contains a profile of a startup.  This part contains numbers and analysis related to that startup</em><em>.)</em></p>
<p>First, some background.  I became interested in the mobile coupon business space a few years back when I started thinking about how mobile coupons could effectively be applied to a college campus.  I approached <a href="http://images.businessweek.com/ss/08/09/0908_2008_entrepreneurs/21.htm" target="_blank">Artia Moghbel</a>, a friend who had started an on-campus discount card (The Pirate Card) and together we wrote up a business plan for <a href="http://www.jwegener.com/MorningsideMobile.pdf" target="_blank">Morningside Mobile</a> [PDF] which won second place in Columbia University&#8217;s B-plan competition.  Essentially Morningside Mobile (MoSiMob) was <a href="http://en.wikipedia.org/wiki/Dodgeball_(service)">Dodgeball</a> crossed with a mobile couponing service and applied to the microcosm of a college campus.<a href="http://blog.jwegener.com/wp-content/uploads/2009/06/box_sms_gateway.gif"><img class="alignright size-full wp-image-391" title="box_sms_gateway" src="http://blog.jwegener.com/wp-content/uploads/2009/06/box_sms_gateway.gif" alt="box_sms_gateway" width="225" height="200" /></a></p>
<p>I spent that summer teaching myself the basics of Ruby on Rails and preparing a variant of Morningside Mobile called <a href="http://www.freefoodfone.com" target="_blank">FreeFoodFone</a>.  But our calculations had relied on using Email &lt;-&gt; SMS gateways to get around high SMS gateway costs.  It turns out this workaround isn&#8217;t technically feasible and the service never got off the ground.  Over the next year, I watched <a href="http://www.tuftsdaily.com/2.5512/social-monkey-founders-hope-to-revitalize-the-tufts-party-scene-1.595981">Social Monkey</a>, a similar idea to Morningside Mobile (launched by some Tufts University students), which shutdown about a year after launch.</p>
<p>Here&#8217;s the big issue:  <strong>SMS text messages cost 3 cents to send.  Each. </strong>That doesn&#8217;t sound like much compared to, say, the 20 cents you would pay the US Postal Service for a direct mail campaign.  But it adds up quickly: sending 1000 text message advertisements costs $30.  <strong>Therefore any type of mobile SMS advertising has a cost basis of $30 CPM (truly COST per thousand).</strong> If you get a 1% response rate to your mobile advertisement, that works out to a $3 cost of reaching that one responsive customer &#8212; and that&#8217;s not including the actual cost of the coupon discount.</p>
<p>Now let&#8217;s look at some figures provided by Mobile Spinach.  Although they declined to share specific rates, Mobile Spinach says they can routinely get double digit CPMs.  Let&#8217;s assume the best case and round it up to a $100 CPM.  Most of the company&#8217;s campaigns are between 500 and 1000 text messages.  This means that at best, the average campaign runs between $50 and $100 dollars.  <strong>That&#8217;s tiny.</strong><br />
<strong><br />
What&#8217;s the Achilles heel of any hyperlocal business based on advertising?  Small deal sizes and high overhead.</strong> The large overhead cost of closing deals makes a local ad business tough to scale effectively.  Let&#8217;s look at this on a micro-level by considering the cost of a salary.  <strong>Let&#8217;s say an entry level salesperson earning $50,000 a year.  They work 50 weeks/year, which means a salary of $1000 a week, $200 a day, or $25 an hour.</strong> As shown earlier, Mobile Spinach&#8217;s ad campaigns are $100 each on the upper end.  Even if this sales person could close an advertising deal every two hours (a herculean task), the sales people would be burning up half of the company&#8217;s incoming revenue.  Add to that the $30 of cost from sending the SMS messages, and there&#8217;s not much leftover.  Sure, some of the business is repeat business (there&#8217;s longer term value once the relationship is formed) &#8212; but it&#8217;s still tough to make the numbers work.</p>
<p>Let&#8217;s look at this from a macro perspective: At full scale, Mobile Spinach envisions 500,000-750,000 users of the service across 30 cities. They also say that at the absolute max, they&#8217;ll send 10 messages/month to users &#8212; any more, and the service becomes overwhelming and annoying. <strong>Let&#8217;s assume every ad is sold at a $100 CPM, which works out to 10 cents per text message.</strong> <strong>3 cents </strong>of that goes to pay for the SMS message, and <strong>2 cents</strong> goes to pay a commission for the Tastemaker (20%). That leaves <strong>5 cents per</strong> message. They&#8217;re sending at maximum 10 messages per month to each user.  Essentially, after we&#8217;re accounted for the cost of goods sold, this works out to a per-user income of $0.50 each month or $6 each year.<a href="http://blog.jwegener.com/wp-content/uploads/2009/06/coupon.jpg"><img class="size-full wp-image-392 alignleft" style="margin-right: 10px;" title="coupon" src="http://blog.jwegener.com/wp-content/uploads/2009/06/coupon.jpg" alt="coupon" width="180" height="240" /></a></p>
<p>Assuming a reasonable $8 customer acquisition cost for the company, it will take more than a year of usage to start earning a profit (and even longer if a reasonable churn rate is factored in). If they succeed in their upper goal of getting 750k users on the service, at $6 annual income per customer, the company will have $4.5 million to pay the salaries of all their staff plus overhead costs. Mobile Spinach plans to have 60-70 sales people at full scale.  At a low figure of $50k/year, a sales force of 70 people would cost $3.5 million in salary alone, not to mention benefits, insurance and overhead.  It&#8217;s tough to see the numbers working.</p>
<p><strong>In the end, there&#8217;s really only two business models based around coupons. </strong>You can be in the business of <strong>selling</strong> coupons to consumers like <a href="http://www.entertainment.com/discount/home.shtml" target="_blank">The Entertainment Guide</a>. Alternatively, you can be in the business of coupon <strong>delivery</strong>:  Newspapers and companies like <a href="http://www.valpak.com/advertise/products-services/cooperative-direct-mail.jsp" target="_blank">Valpak</a> (owned by a newspaper company) have done this successfully for years. There are many companies working on the delivery of mobile coupons: Cellfire, 8coupons, CouponAlbum.com, CouponChief.com and CouponMountain.com just to name a few.  But none have taken off.</p>
<p>Why not?  It&#8217;s hard to say.  The truth is that SMS messaging has existed for years.  Mobile Spinach could have been built six years ago.  There&#8217;s no recent technological change or evolution that opened up the market opportunity  But the company thinks they&#8217;ve figured out the issues that have plagued typical SMS coupon services.</p>
<p>Most coupon services are bothersome and overwhelming.  Mobile Spinach tries to solve this problem by offering &#8216;exclusive&#8217; offers and also by letting users pick exactly the type of deal they&#8217;re looking for:  For example,  within the &#8216;restaurants&#8217; category are the following sub-options:  &#8216;$$$$&#8217; or &#8216;$$$&#8217; or &#8216;$$&#8217; or &#8216;$&#8217; and fast food, vegan, seafood, grill, deli/bakery, italian, asian, american, organic and health food.  This level of specificity sounds great to the end user,<strong> but specificity and exclusivity are the opposites of scalability &#8212; and scalability is key to a technology startup.</strong> By breaking down their deals into tons of small categories,<strong> the company has created a thousand different chicken and egg problems for themselves:</strong> creating a critical mass of merchant in each niche AND creating a critical mass of users interested in that niche.  In my humble opinion, the company should sharpen their focus: pick a single niche, dominate it, and then expand horizontally from there.<a href="http://blog.jwegener.com/wp-content/uploads/2009/06/chickenandegg1.jpg"><img class="alignright size-full wp-image-407" title="chickenandegg" src="http://blog.jwegener.com/wp-content/uploads/2009/06/chickenandegg1.jpg" alt="chickenandegg" width="232" height="173" /></a></p>
<p>Additionally, the company is trying to build their user base from scratch.  But companies with large existing mobile user bases would seem to make a perfect fit for Mobile Spinach&#8217;s mobile couponing product.  Why not partner with a company like loopt?</p>
<p>Basically, the mobile couponing business is an extremely tough business to scale well.  I like mobile spinach&#8217;s gusto and &#8216;dial-down&#8217; approach, but at the end of the day I&#8217;m still vexed by these three issues:</p>
<p>1)  the high cost of sending SMS text messages.<br />
2) the difficulty of convincing consumers to share their mobile phone numbers.<br />
3) the high overhead costs of closing numerous small local deals.</p>
<p>This last issue concerns all types of hyperlocal companies:  Yelp, Outside.in, Patch.com, GoMobo, Grubhub, and Yodle just to name a few.</p>
<p><strong>Local is a tough business. </strong></p>
<p>As usual, readers, I&#8217;d love to hear your comments and questions.  So let&#8217;s have &#8216;em!</p>

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<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
<li><a href="http://blog.jwegener.com/2010/07/29/building-a-better-broken-product/">Building a Broken Product</a></li>
<li><a href="http://blog.jwegener.com/2010/06/30/hot-nyc-startups-jumppost-singleplatform-challengepost-kickstarter-yipit/">Five Pre-Funded NYC Startups To Watch</a></li>
<li><a href="http://blog.jwegener.com/2010/05/18/importance-graphic-design-visual-literacy/">Do You Speak the Language of Visual Design?</a></li>
</ul><br />
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		<slash:comments>15</slash:comments>
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		<title>iPhone App Competitive Dynamics</title>
		<link>http://blog.jwegener.com/2009/04/01/iphone-app-competitive-dynamics-downward-pricing-pressure/</link>
		<comments>http://blog.jwegener.com/2009/04/01/iphone-app-competitive-dynamics-downward-pricing-pressure/#comments</comments>
		<pubDate>Wed, 01 Apr 2009 15:41:18 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Apple]]></category>
		<category><![CDATA[SEM]]></category>
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		<guid isPermaLink="false">http://blog.jwegener.com/?p=293</guid>
		<description><![CDATA[Image by emilychang via Flickr To say that Apple&#8217;s App Store is thriving would be an understatement.  There have been 800 million downloads across Apple&#8217;s 30 million iPhones and iPod Touches &#8212; meaning on average each device has downloaded 27 apps.  The App Store now has over 25,000 apps and 250+ are added every day. [...]]]></description>
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<dt class="wp-caption-dt"><a href="http://www.flickr.com/photos/95756589@N00/2854977417"><img title="iPhone app display, apple store sf" src="http://farm4.static.flickr.com/3084/2854977417_79fb909c28_m.jpg" alt="iPhone app display, apple store sf" width="240" height="180" /></a></dt>
<dd class="wp-caption-dd zemanta-img-attribution" style="font-size: 0.8em;">Image by <a href="http://www.flickr.com/photos/95756589@N00/2854977417">emilychang</a> via Flickr</dd>
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<p><strong>To say that Apple&#8217;s App Store is thriving would be an understatement</strong>.  There have been 800 million downloads across Apple&#8217;s <a href="http://venturebeat.com/2009/03/17/iphone-30-event-30-million-sold-now-thats-a-game-platform/">30 million</a> iPhones and iPod Touches &#8212; meaning on average<strong> each device has downloaded 27 apps</strong>.  The App Store now has over <strong>25,000 apps</strong> and <a href="http://blog.charlesteague.com/links/2009/03/app-store-data-3-13-2009.html">250+</a> are added every day.</p>
<p>In such a crowded marketplace, how can an app possibly get noticed?</p>
<p>As developers know all too well, the <strong>key to being noticed is getting the app into the top-selling lists.</strong> Pinch Media&#8217;s <a href="http://blog.jwegener.com/2009/02/19/iphone-apps-economics-of-free-vs-paid/">data shows</a> that &#8220;appearing on a top 100 list increases daily new users by an average of 2.3x&#8221; and appearing in the top 10 or top 25 list can mean an <strong>order of magnitude gain.</strong></p>
<blockquote><p>App developers have told me they&#8217;d do anything short of cutting their toes off to get into the top 10, top 50, whatever. That often includes lowering the price of their app.<br />
<a href="http://www.businessinsider.com/iphone-app-prices-stabilizing-2009-3">-Dan Frommer, Silicon Alley Insider</a></p></blockquote>
<p>So let&#8217;s say you have an app that&#8217;s selling for $1.99.  Sales are ok, but you want to make more money.  So you <strong>cut your price</strong> to 99c in an attempt to get on the best-selling list.  It&#8217;s perfectly logical after all:  the variable cost per unit is zero.  <strong>If you can increase sales 2.3x but earn half as much on each sale, you&#8217;ll come out a winner.</strong></p>
<p><a href="http://blog.jwegener.com/wp-content/uploads/2009/04/app-store-top-25.jpg"><img class="alignleft size-full wp-image-297" style="margin-right: 10px;" title="app-store-top-25" src="http://blog.jwegener.com/wp-content/uploads/2009/04/app-store-top-25.jpg" alt="app-store-top-25" width="179" height="269" /></a>So obviously there&#8217;s a strong incentive for developers to cut their prices and concentrate on doing whatever it takes to get into that top 100 list.  And therein lies developers&#8217; biggest complaint: <strong>the app store calculates popularity by unit downloads &#8212; without taking price into consideration.</strong> This structure has created immense competition and downward pricing pressure.  In February, the average top-50 app sold for $2.39 which is <a href="http://www.businessinsider.com/iphone-app-prices-tanking-2009-2">down 34%</a> from $3.63 only two months prior.</p>
<p>Many have called on Apple to <strong>sort the list by total revenue rather than unit downloads.</strong> For example consider one purchase of a $10 app equivalent to ten purchases of a $1 app for ranking purposes.  This would highlight the apps creating the <strong>most value rather than the most downloads</strong> and it would help app developers sustain higher pricing.</p>
<p>But let&#8217;s talk about<strong> Apple&#8217;s dirty little secret: they want apps to be cheap</strong>.  The cheaper the apps, the more downloads &#8212; and the more value the user gets from the device.  This helps sell more devices, and although lower app prices does mean less app store revenue (Apple takes a 30% cut of app sales), <strong>that money is peanuts compared to Apple&#8217;s <a href="http://www.businessinsider.com/2007/10/apples-iphone-bounty-432-from-att">$425 profit/phone.</a></strong> In fact, Apple has said publicly that the app store is being run as a break-even service:</p>
<blockquote><p>We’re thinking about the App Store in the same way that we think about the iTunes store. While it will generate some revenues, it will be a small profit generator, and just as with the iTunes store making iPods more attractive,<strong> </strong>we think the <strong>App Store will make the iPhone and iPod Touch more attractive to customers</strong>. We’ll hopefully see an indirect return by <strong>selling more iPhones and iPod Touches.</strong><br />
<a href="http://seekingalpha.com/article/86056-apple-f3q08-qtr-end-6-28-08-earnings-call-transcript?page=-1" target="_blank">-Peter Oppenheimer, Apple’s CFO and SVP</a></p></blockquote>
<p>The download pricing pressure caused by the per-unit ranking method is <strong>seriously hurting developers</strong>.  Is this a sustainable model?  No.  Developers will get fed up and leave eventually.  But right now<strong> it&#8217;s a one horse race</strong>: no other mobile platform has achieved much traction.  The most money for developers still lies in writing software for the iPhone.  And until Apple&#8217;s hand is forced by competition making significant inroads, a la Amazon forcing Apple to make iTunes DRM free, Apple won&#8217;t change a thing.  <strong>Everything is perfectly aligned in their favor.</strong></p>
<p>One last point:  The upcoming iPhone 3.0 software supports a subscription pricing model for apps.  To be 100% clear, the new software will support in-app purchasing which asks the user to pay each month to continue using the application (rather than an automatic recurring subscription payment system like many people envisioned &#8212; the difference is subtle but important).  Some have reacted negatively to the subscription pricing announcement, fearing that apps will suddenly turn into crippleware and try to charge for every feature that was previously free.  This may be true at first, but ultimately it&#8217;s a free market and the problems will sort themselves out.  The simple truth is that <strong>the lack of a subscription pricing model was leaving money on the table.  It&#8217;s nice to see that being remedied. </strong></p>
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<li><a href="http://blog.jwegener.com/2010/08/18/young-entrepreneurs-and-b2b-startups-doomed-to-fail/">Young Entrepreneurs and B2B Startups: Doomed to Fail?</a></li>
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		<title>iPhone App Economics: Free vs Paid</title>
		<link>http://blog.jwegener.com/2009/02/19/iphone-app-economics-free-vs-paid/</link>
		<comments>http://blog.jwegener.com/2009/02/19/iphone-app-economics-free-vs-paid/#comments</comments>
		<pubDate>Thu, 19 Feb 2009 08:05:03 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[Analysis]]></category>
		<category><![CDATA[Metrics]]></category>
		<category><![CDATA[Startups]]></category>
		<category><![CDATA[ecommerce]]></category>
		<category><![CDATA[iphone]]></category>
		<category><![CDATA[media]]></category>

		<guid isPermaLink="false">http://blog.jwegener.com/?p=255</guid>
		<description><![CDATA[Image via CrunchBase Greg Yardley, CEO of Pinch Media gave a fascinating presentation at last night&#8217;s NYC iPhone Developer Meetup.  Greg&#8217;s slides were chock full of numbers and data gathered by Pinch Media&#8217;s iPhone analytics platform.  As you might expect, I was in heaven. Greg demonstrated his evidence that a free ad-supported app rarely earns [...]]]></description>
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<dt class="wp-caption-dt"><a href="http://www.crunchbase.com/company/pinch-media"><img title="Image representing Pinch Media as depicted in ..." src="http://www.crunchbase.com/assets/images/resized/0001/9614/19614v1-max-450x450.png" alt="Image representing Pinch Media as depicted in ..." width="250" height="117" /></a></dt>
<dd class="wp-caption-dd zemanta-img-attribution" style="font-size: 0.8em;">Image via <a href="http://www.crunchbase.com">CrunchBase</a></dd>
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<p>Greg Yardley, CEO of <a href="http://www.pinchmedia.com/" target="_blank">Pinch Media</a> gave a fascinating <a href="http://www.pinchmedia.com/appstore-secrets/">presentation</a> at last night&#8217;s NYC iPhone Developer Meetup.  Greg&#8217;s slides were chock full of numbers and data gathered by Pinch Media&#8217;s iPhone analytics platform.  As you might expect, I was in heaven.</p>
<p>Greg demonstrated his evidence that a<strong> </strong><strong>free ad-supported</strong><strong> app rarely earns more than a 99c app.</strong> After Apple&#8217;s 30% cut, this 99c becomes 70c.  So what does it take to make 70 cents through advertising?</p>
<p>The Pinch Media numbers show that <strong>free apps, as a category, tend to be used 6.6 times more often than paid apps</strong> (this figure incorporates both the increased download popularity of free apps and also the slightly decreased frequency-of-use of free apps versus paid apps).  On average, free applications are used heavily at first but usage levels off quickly &#8212; <strong>the average app lifetime is 12 runs.</strong></p>
<p>So compared to a single paid app, making an app free results in 6.6x more app uses and at an average lifetime of 12 runs/app = 80 sessions. Remember that the paid app makes 70c.  <strong>So the </strong><strong>question becomes &#8220;Can the average free application make up 70c in advertising revenue across 80 usage sessions?&#8221; </strong></p>
<p>Greg&#8217;s answer: <strong>&#8220;Hell No.&#8221; </strong> Assuming one ad is shown per each session, this requires a CPM of $8.75.  Unfortunately, typical CPMs are 50c &#8211; $2.00, far below the point required to match the paid app&#8217;s revenue.  Unless your app can serve 18 ads per session (assuming a worst case 50c CPM), or there&#8217;s some especially &#8216;sticky&#8217; property that makes users reliably use your app repeatedly, Greg concludes that charging for your app is generally a good idea.</p>
<p>Slides from the presentation below:</p>
<div id="__ss_1044869" style="width: 425px; text-align: left;"><a style="font:14px Helvetica,Arial,Sans-serif;display:block;margin:12px 0 3px 0;text-decoration:underline;" title="iPhone AppStore Secrets - Pinch Media" href="http://www.slideshare.net/pinchmedia/iphone-appstore-secrets-pinch-media?type=presentation">iPhone AppStore Secrets &#8211; Pinch Media</a><object width="425" height="355" data="http://static.slideshare.net/swf/ssplayer2.swf?doc=pinchmedianycdevmeetup-1235013090651786-2&amp;stripped_title=iphone-appstore-secrets-pinch-media" type="application/x-shockwave-flash"><param name="allowFullScreen" value="true" /><param name="allowScriptAccess" value="always" /><param name="src" value="http://static.slideshare.net/swf/ssplayer2.swf?doc=pinchmedianycdevmeetup-1235013090651786-2&amp;stripped_title=iphone-appstore-secrets-pinch-media" /><param name="allowfullscreen" value="true" /></object></p>
<div style="font-size: 11px; font-family: tahoma,arial; height: 26px; padding-top: 2px;">View more <a style="text-decoration:underline;" href="http://www.slideshare.net/">presentations</a> from <a style="text-decoration:underline;" href="http://www.slideshare.net/pinchmedia">pinchmedia</a>. (tags: <a style="text-decoration:underline;" href="http://slideshare.net/tag/pinch">pinch</a> <a style="text-decoration:underline;" href="http://slideshare.net/tag/smartphone">smartphone</a>)</div>
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		<title>iPhone App Store SEO and Keyword Stuffing</title>
		<link>http://blog.jwegener.com/2009/02/18/iphone-app-store-seo-and-keyword-stuffing-fun-naked-girls-inside/</link>
		<comments>http://blog.jwegener.com/2009/02/18/iphone-app-store-seo-and-keyword-stuffing-fun-naked-girls-inside/#comments</comments>
		<pubDate>Wed, 18 Feb 2009 06:59:12 +0000</pubDate>
		<dc:creator>Jonathan</dc:creator>
				<category><![CDATA[SEO]]></category>
		<category><![CDATA[User Experience]]></category>
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		<guid isPermaLink="false">http://blog.jwegener.com/?p=236</guid>
		<description><![CDATA[An interesting trend I&#8217;ve noticed lately:  iPhone App developers have finally started paying attention to SEO (Search Engine Optimization).  And by search engine, I mean the App Store&#8217;s search feature.  Developers have started putting terms into their app descriptions so their app shows up for related queries.  But developers have also begun including unrelated but [...]]]></description>
			<content:encoded><![CDATA[<p><a href="http://blog.jwegener.com/wp-content/uploads/2009/02/iphone-seo-keyword-stuffing-wobble.jpg"><img class="alignright size-full wp-image-237" style="margin-left: 10px;" title="iphone-seo-keyword-stuffing-wobble" src="http://blog.jwegener.com/wp-content/uploads/2009/02/iphone-seo-keyword-stuffing-wobble.jpg" alt="iphone-seo-keyword-stuffing-wobble" width="224" height="336" /></a>An interesting trend I&#8217;ve noticed lately:  <strong>iPhone App developers have finally started paying attention to SEO (Search Engine Optimization</strong>).  And by <em>search engine,</em> I mean the App Store&#8217;s search feature.  Developers have started putting terms into their app descriptions so their app shows up for related queries.  But developers have <em>also</em> begun including <strong>unrelated but popular terms, ie <a href="http://en.wikipedia.org/wiki/Keyword_stuffing">keyword stuffing</a>. </strong></p>
<p>For a good example, check out this screenshot of the description for &#8216;Wobble• Bikini• Fun.&#8217;  The app&#8217;s developers have <strong>cleverly included the names of all the top applications</strong> and terms like &#8216;fart&#8217; and &#8216;weather&#8217; so that their app will show up for any of these search terms and get more traffic and downloads.  In other cases, I&#8217;ve seen descriptions that &#8216;also recommend these fun apps&#8217; and then proceed to include the name of every top application.  Very smart.</p>
<p>Let&#8217;s also talk about the name of this app for a second: &#8216;Fun&#8217; is part of the name&#8230;brilliant!  Guess what the top search result for &#8216;fun&#8217; is?  You guessed it. <strong> As long as they&#8217;re going this route, why not just name the app &#8216;fun• naked• girls• inside&#8217;? </strong> By the way, this 99c app is the #5 best selling paid application as of press time (or clicking &#8216;post&#8217; rather).</p>
<p>One last thing.  Notice the final line of the long paragraph:  &#8220;And &#8211; people of both sex will love it.&#8221;  Isn&#8217;t the grammatically correct term &#8220;sexes&#8221;?  And wouldn&#8217;t writing &#8220;both genders&#8221; or &#8220;guys and girls will both love it&#8221; say the same thing in a less awkward way?</p>
<p><strong>Alas, these clever developers have realized the power of the popular search term &#8220;sex.&#8221;</strong> This app ranks third for a search of &#8220;sex&#8221;  &#8212; right behind the official <em>Sex and the City</em> application.</p>
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