New Work City (NWC) is one of the most important hubs of the NYC technology scene.

Why?  New Work City houses ~50 amazing tech freelancers and entrepreneurs running a dozen or so fledgling startups such as Perpetually, Loosecubes, Urban Pregame, Homingcloud and TouchGraph.  Creating a home for independent workers and early stage entrepreneurs creates the fertile soil needed to seed innovation and birth new companies. NWC is that home. In short, New Work City is a home for the homeless and a desk for the deskless, individuals otherwise relegated to working from coffee shops or trapped in the depressing isolation of their own apartments.

If you’re thinking “desks for rent” you’re missing the bigger picture.  It’s all about the people. NWC is people getting together because working in a stimulating environment surrounded by friendly passionate people who love what they do is f***ing awesome. It’s productive, it’s fun, and it’s deeply satisfying.

On September 1, a mere ten days from today, NWC opens its new home:  a brand new 5,000sq space at Canal St and Broadway. The NEW New Work City will support a larger community and will be amazing. As an independent space, New Work City is self-sustained by paying members of the community — people like me. There’s no sugardaddy bankrolling it and no VC firm backing the space.  It’s run as a break-even business and it’s entirely volunteer run — truly a space for us and by us.

In ten days, the dream for NYC to have a dedicated coworking space will be realized. It’s a dream that initially took shape back in the summer of 2007 as part of an East Village coffee shop (CafeBricolage).  Many of the same people are still at the helms.

Having an awesome home to independent workers and entrepreneurs is crucial to New York City’s goal to become a major technology hub.  However, NWC needs your financial support to make this happen. We need about $100,000 total for the new space, and are attempting to raise $15,000 through Kickstarter.  Please donate to our KickStarter fund and be generous (let’s smash through this goal!)

Also, please seriously consider whether your company or organization could benefit from a partnership/sponsorship opportunity with NWC.  If so, please get in touch with me and I’ll happily put you in touch with “mayor” Tony.

By supporting NWC, you’re supporting NYC as a healthy place for startups.  On behalf of me and all New Work City members, thank you for your support,
Jonathan Wegener

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young entrepreneurs should focus on building B2C companies since they lack the deep industry experience needed to build successful B2B companies.

Allow me to explain my thinking.  Young people in their 20′s trying to start a business-to-business face an uphill battle for several reasons:

1)  Identifying Opportunities is Hard
The best companies are started by people solving their own problems — or so goes the classic logic.  But for young entrepreneurs without any deep industry experience, there aren’t any obvious problem for them to solve.

2) Building the Right Product is Hard
When you haven’t experienced the pain point you’re solving, you don’t truly understand customer needs.   You can try to put yourself in their shoes, listen closely to their problems, and design a solution.  But ultimately, it’s tough to get product-market fit from the position of an outside observer.  A related issue: anytime you’re solving someone else’s problem, staying motivated becomes tough.  Will focusing on the pot of gold at the end of the rainbow sustain the necessary passion to succeed?

3)  Sales, Marketing, and Business Development are Hard
Without industry experience, you won’t have the personal relationships to get your food in the door and close deals and you won’t know the right distribution channels.  You’ll struggle to craft your marketing message in a language that speaks to your customer’s needs.  Furthermore, you won’t have existing relationships with the other players in the industry which could be your partners.

Your Responses

Here’s a few of the fantastic responses I’ve already gotten in response to “entrepreneurs in their 20s should focus on B2C products since they lack any true ‘industry’ experience needed to build B2B products”:

Start With What You Know?

So what do most young B2B entrepreneurs do? Many start with what they know…local! The business on the corner seems like a good place to start.  And of course the market is now flooded with these hyperlocal advertising ideas — “a text message couponing solution for restaurants”  (see my earlier post on that subject).

I can’t think of too many young entrepreneurs that have successfully started B2B ventures.  In fact, the only person that comes to mind is Darren Herman.  Most young entrepreneurs stick to B2C, creating slightly better products to expose undiscovered product opportunities (Tumblr, Box.net Facebook, and Plancast come to mind).  Are there tons of unsexy B2B ventures from young entrepreneurs that have simply flown under the radar?

Your turn: what’s a 20-something to do?

I’m done talking — now it’s your turn.  Any young successful B2B entrepreneurs flying under the radar?  How did you do it?

Investors/VCs — do you find most B2B companies started by someone with deep experience in that industry?  Are there outliers?  How much industry experience is typical.  Weeks?  Years?  Enough to rule out 20-somethings?

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When a VC friend asked which young NYC startups I find exciting, I sent him a list of pre-funded companies that I’ve been watching. Afterwards I started writing them into a blog post. Well, I should have pressed publish sooner because as the post sat unfinished for the last week, several have since been funded! I’m including them anyway. Good times!

Here’s my short list of NYC startups I’m keeping my eye on:

JumpPost

Apartment hunting is broken.  JumpPost could be the fix.

JumpPost gives apartment hunters ‘first dibs’ on the best apartments. How do they get the best apartments?  JumpPost pays apartment dwellers $500 to add a listing to the site several months ahead of their actual move out date.  Sometimes it pays to plan ahead.

Jordan and his team is onto something big and they’ve already generated some good press (getting paid $500 for doing nothing is especially buzzable!).  I imagine they’ll need some product pivots before JumpPost truly takes off, but this one’s got potential. Personally I would add a social layer to the product and emulate AirBnB which has made finding places to stay fun, easy, and safe.  JumpPost can potentially bring that same user experience to apartment hunting.

SinglePlatform

SinglePlatform gives bars and restaurants a centralized tool to easily update multiple social media profiles: Facebook, Twitter, Yelp, Citysearch, Myspace, and their own website. It’s the same core concept as Postling, except SinglePlatform seems to be executing better.  The founder, Wiley Cerilli, spent the last 10 years running sales at SeamlessWeb so the company clearly understands the market they’re serving — a point that becomes immediately clear browsing their site: “One of the most frequent phone calls to establishments is regarding what games they are playing. SinglePlatform allows you to select which TV packages and team affiliations you have and then posts those games automatically.”

SinglePlatform also seem to be quite good at selling their product at a comfortable price: $450 for a year.  That upfront payment (versus a monthly fee) should help the young company with cash flow issues and also make paying commissioned sales staff easier.  This six month old company seems to be quietly staffing up - LinkedIn already shows 11 employees.  Their aggressive sales force is hitting the pavement hard and closing deals left and right and the product is already being embraced by their customers.  And to top it off, the company is profitable.  This ones gonna be big…

ChallengePost

ChallengePost is a self-described “marketplace for challenges.”  Essentially, ChallengePost is home to dozens of competitions such as NYC’s BigApps which gave $20,000 to developers who built the best mobile apps using NYC datasets. Creative challenges help organizations harness the creativity of the masses to solve tough problems and generate ideas.  It’s a powerful concept that will increasingly become the norm among large organizations struggling to be innovative (also check out Hypios).  Recently, ChallengePost was named the official challenge platform of the US Government.

UPDATE: Sharp-eyed Danny Moon points out that in June 2009, ChallengePost raised an angel round of $500,000.

Kickstarter

Kickstarter is a funding platform for artists, designers, filmmakers, musicians etc. Essentially, it helps people raise funding to accomplish cool things.  Kickstarter handles the headache of accepting donations and also drives eyeballs to your project.  It also imposes some business logic to the process:  like a Groupon deal, buyers (donors) are only charged if the project raises the target amount of money. And fundraisers can associate rewards for different donation tiers (ie T-shirt if you donate $50)

Kickstarter benefitted from the PR buzz stirred up by Diaspora, an attempt by four NYU students to build a private decentralized Facebook.  In Diaspora’s efforts to raise $10,000 on the Kickstarter site, they unintentionally found themselves with $200,000 of donations - effectively an angel round of financing.

Yipit

Yipit makes it easy to find the best deals in your city.  Local daily deals sites like Groupon are hot right now.  But there are literally hundreds of them. Who wants to subscribe to a hundred email newsletters?! Yipit sits above them all, aggregating the fragmented marketplace into a single customized daily deal newsletter with the categories the user wishes to receive.  This puts Yipit in a position to charge a referral/lead-gen fee for each sale it drives to the deal sites. Brilliant.

UPDATE: On June 30, Yipit raised $1.3M.

Other honorable mentions:

-Shoutworthy: A social recommendation system built on Facebook. Think Linkedin’s recommendation tool.  Now imagine a much better version!

-TopGuest: A loyalty reward system built on top of foursquare/gowalla etc.  Formerly known as UDorse.

-Endor.se: A way to find talented freelancers, gauge availability, and built a portfolio of people whose work you endorse.

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The most basic principle of business is that profit is revenue minus costs.  Try considering all fixed costs as a rate — especially a daily or hourly rate — and then look around you.  You’ll find you have more insight into existing businesses or the potential of new ventures to succeed. 

And you’ll find that some business ideas simply don’t make sense.

Don’t plan on building a business by selling a product for $2 that takes an hour of time to produce unless you’re superhuman and don’t need sleep.

Don’t franchise a mobile RV arcade for “between $89,000 and $200,000″ a year which can fetch “$300 to $350 for a two-hour party appearance” without carefully considering the math — that you’ll need to book somewhere between 250 to 650 clients just to break even on your initial upfront investment.  I don’t know too many kids who have birthday parties on Monday nights..and there’s only so many hours in a weekend and only 52 weekends in a year.  You’re might be paying off these costs for eternity…and the high tech games will certainly have become stale by then.

And please don’t build an SMS mobile coupon company on an assumption that you’ll get a salesperson to hit up every local business selling your $10 service (so cheap that nobody will say no!).  As mentioned in my article about SMS coupons, an entry level salesperson earning $50,000 a year is a cost of $1000 a week or $200 a day or $25 an hour.  Make sure a sales person would earn more than they would cost.  If the numbers don’t work, your business won’t work.

But wait!  It’s not all gloom and doom. Thinking in terms of daily sales can actually be really inspiring for a first time entrepreneur:

If you’re quitting a job to start your own company, consider what it will take in daily earnings to replace your salary.  Better yet, consider how much you honestly need to be ramen profitable.

Most recent college graduates in NYC working a full time job are probably earning somewhere between $35,000 – $80,000 depending on industry and skill set.  Consider that $100/day for 365 days is $36,500 annually.  This is a livable wage for most scrappy 20-somethings (assuming you don’t have a family to support and you’re not drowning in school debt).  Consider that $200/day is a rather comfortable annual salary of $73,000.  (And yes, these numbers are based on working 7 days a week.  And they don’t take into account the unpaid time you’ll put into an initial product launch.)

If you need inspiration to get started, never forget just how ‘small’ a start can be: just get to $100 a day.  Consider it milestone number one for your first entrepreneurial venture.  Let’s say you have a product idea that you think would sell for $20 with a 50% margin.  Ask yourself: “Can I sell 10 per day?”  Consider that again: 10 per day.  Consider that there’s six billion people in the world,  is it really so hard to find 10 customers each day?  Or if you’re working with a partner, 20 customers?

So consider David Heinemeier Hansson’s amazing advice (that I have echoed above) and stop thinking about your next billion dollar startup.  I believe first time entrepreneurs (of which I am one myself) should start small.  Go for the lowest bar of success: the $100/day idea.  Once you’ve conquered that, go for the $100,000 idea, then the million dollar idea, then the billion dollar idea.  Along the way you’ll meet fantastic people, gain skills and confidence, and maybe even have some fun.

Now if only my 2c could be put towards rent…

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Aggregators can exist for both content and also products/services and there’s thousands of examples of them across every category:  Google News (news content), OpenTable (restaurants), Expedia (airlines and hotels), Lendingtree (loans), SeamlessWeb (restaurant delivery), Digg (web content), Servicemagic (service contractors), Zocdoc (doctors), Admob (mobile ad units), AdWhirl (mobile ad networks), Pontiflex (marketing leads), GymTicket (gyms).

Convenience is often the key value these aggregators offer: a one-stop stop for customers to find what they’re looking for without going to ten different places.  The ability to compare items is also important. 

In almost every case there’s a interesting tension between these ‘aggregators’ and their ‘constituents.’  Let’s consider Google News.  Google news is increasingly the starting point for people looking for news on the internet. Newspapers hate that Google News is scraping their content and eroding their brand value — but at the same time, Google News drives a significant proportion of their web traffic.  They’d be stupid not to want that. As a member of an aggregator, they’re ensuring they get web traffic.  Unfortunately they’re helping build the Google News brand rather than their own.

Are they shooting themselves in the foot?

This issue arose in my post about Opentable.  One commenter wrote restaurants participating in OT, build the OpenTable brand rather than the restaurant’s own brand. It’s true!  But what can done?

Once established, the aggregator has the upper hand. All the individual entities/constituents act in their own self-interest and therefore will remain part of the network.  No single constituent can defect without suffering harm.  And widespread rebellion / mutiny is unlikely — it’s unlikely that all the restaurants are going to band together and start their own version of OpenTable.  It’s a tragedy of the commons, and the aggregators benefit handsomely from the resulting lock-in network effect.

As an established aggregator, risk can come from only a few places:

1) Competition in the form of another aggregator

2) One or more constituents decide to sidestep you.

#1 is hard to avoid.  #2 is rare, but extremely interesting when it does happen.  One example of this is Southwest Airlines, which isn’t listed on any of the travel booking sites.  Similarly, Admob refused to serve ads through AdWhirl, an ad network aggregator (and when that didn’t work they bought ‘em!)

Occasionally the constituents themselves will ally:  One example is Hulu, a joint venture between NBC, FOX and ABC, which aggregates all their content into a single place.

And once in a blue moon a constituent will creatively embrace aggregation in their attempt to fight the aggregators.  For example, Progressive Auto Insurance proudly shows you the prices of their competitors alongside their own prices.  Fascinating strategy.

The more fractured and crowded the marketplace, the less likely a mutiny or rebellion.  Are the thousands of restaurants on Seamlessweb suddenly going to unite to form their own online ordering system and destroy Seamlessweb?  Not likely.  Are the dozen or so large newspapers going to unite to rally against google news and demand to be de-listed or compensated better?  Absolutely.

As the number of constituents increases, the dependency on any one constituent decreases.  And as an aggregator grows its brand, it becomes extremely difficult for a constituent to break away.  Doing so requires an extremely strong brand and unique offering (like Southwest Airlines) and an alternative sales/delivery channel.

This is most important in the context of a offline company: Consider that Brick and Mortar stores like Walmart are essentially product aggregators.  Shoppers go to Walmart because they know it has a wide selection at great prices.  Suppliers don’t want to miss out on the huge volume that the Walmart sales channel delivers.  The more Walmart grows, the more crucial they become to their suppliers’ businesses.  And the more suppliers they gain, the more crucial they become to consumers.  At the end of the day, Walmart has incredible pricing leverage over its constituent suppliers. There simply aren’t many alternative channels.  Suppliers are trapped.

I’m going to end the post here because it’s already way too long.  But please leave your thoughts and help me push this topic further.  Thank you!

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Early this morning Muckrack began selling “one line press releases” (1lpr anyone?) — twitter-style short form press announcements.  Muckrack.com is a site that aggregates and categorizes the tweets of hundreds of journalists.  Among its loyal visitors are journalists using the site to keep tabs on their colleagues.  By purchasing a 1lpr, you essentially get your message in front of journalists in a form they’ll actually read.

In its current implementation, these are basically sponsored advertisements.  However I see today’s product as part of the first move in a series that will forever change the world of PR.

I first took an interest in PR trying to learn how best to do the press outreach effort for Exit Strategy NYC.  I attended Internet Week’s PR for Startups event and quickly got it:  journalists are drowning with information overload.  As Allen Stern said that night, journalists get pitched hundreds of times each day.  The vast majority of the pitches are misguided and border on spam.  To the startup struggling to get their announcement noticed, relationships are golden.  Second best is identifying the exact journalists who cover your niche and then writing them short, personally tailored emails which are easily scannable.

A few weeks later, I saw a company called MatchPoint present at New York Tech Meetup.  The audience couldn’t have cared less about this product.  But to the people who *got it* and understood the core problem that MatchPoint is attempting to solve – PR professionals struggling to identify the right journalists, and journalists struggling with the information overload caused by mismatched PR pitches — the presentation was revolutionary.  MatchPoint is a communications tool designed for the PR Professional to “help identify and interact with the journalists and bloggers who may actually care about what you have to say.”  Given a press release or several keywords, the software engine produces a list of journalists, ranked by relevance based on a large database of their past news sources.

What I find fascinating and revolutionary about both Muck Rack and Matchpoint is they’re two different solutions to the same signal-to-noise issue plaguing the world of press releases.  Matchpoint solves it with a smarter matching engine.  Muck Rack solves it with bite sized pitches (reinforced by their pricing model: $1 per character with a $50 minimum) — ie constraint and smart pricing.

Right now, both companies are only halfway there in their attempts to solve information overload.  Their products currently give PR professionals a better way to get their message out.  But the real value will come from getting the journalists on board too.  When journalists start trusting these services as reliable sources of personally relevant information, they will become extremely valuable. Once the journalists get on board, there’s a nice network effect and lock-in that will make these services worth millions.

Silicon Alley Insider calls 1lprs the “smartest development in public relations since the canned quote.”  I couldn’t agree more.

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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 Artia Moghbel, a friend who had started an on-campus discount card (The Pirate Card) and together we wrote up a business plan for Morningside Mobile [PDF] which won second place in Columbia University’s B-plan competition.  Essentially Morningside Mobile (MoSiMob) was Dodgeball crossed with a mobile couponing service and applied to the microcosm of a college campus.

I spent that summer teaching myself the basics of Ruby on Rails and preparing a variant of Morningside Mobile called FreeFoodFone.  But our calculations had relied on using Email <-> SMS gateways to get around high SMS gateway costs.  It turns out this workaround isn’t technically feasible and the service never got off the ground.  Over the next year, I watched Social Monkey, a similar idea to Morningside Mobile (launched by some Tufts University students), which shutdown about a year after launch.

Here’s the big issue:  SMS text messages cost 3 cents to send.  Each. That doesn’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.  Therefore any type of mobile SMS advertising has a cost basis of $30 CPM (truly COST per thousand). If you get a 1% response rate to your mobile advertisement, that works out to a $3 cost of reaching that one responsive customer — and that’s not including the actual cost of the coupon discount.

Now let’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’s assume the best case and round it up to a $100 CPM.  Most of the company’s campaigns are between 500 and 1000 text messages.  This means that at best, the average campaign runs between $50 and $100 dollars.  That’s tiny.

What’s the Achilles heel of any hyperlocal business based on advertising?  Small deal sizes and high overhead. The large overhead cost of closing deals makes a local ad business tough to scale effectively.  Let’s look at this on a micro-level by considering the cost of a salary.  Let’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. As shown earlier, Mobile Spinach’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’s incoming revenue.  Add to that the $30 of cost from sending the SMS messages, and there’s not much leftover.  Sure, some of the business is repeat business (there’s longer term value once the relationship is formed) — but it’s still tough to make the numbers work.

Let’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’ll send 10 messages/month to users — any more, and the service becomes overwhelming and annoying. Let’s assume every ad is sold at a $100 CPM, which works out to 10 cents per text message. 3 cents of that goes to pay for the SMS message, and 2 cents goes to pay a commission for the Tastemaker (20%). That leaves 5 cents per message. They’re sending at maximum 10 messages per month to each user.  Essentially, after we’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.

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’s tough to see the numbers working.

In the end, there’s really only two business models based around coupons. You can be in the business of selling coupons to consumers like The Entertainment Guide. Alternatively, you can be in the business of coupon delivery: Newspapers and companies like Valpak (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.

Why not?  It’s hard to say.  The truth is that SMS messaging has existed for years.  Mobile Spinach could have been built six years ago.  There’s no recent technological change or evolution that opened up the market opportunity  But the company thinks they’ve figured out the issues that have plagued typical SMS coupon services.

Most coupon services are bothersome and overwhelming.  Mobile Spinach tries to solve this problem by offering ‘exclusive’ offers and also by letting users pick exactly the type of deal they’re looking for:  For example,  within the ‘restaurants’ category are the following sub-options:  ‘$$$$’ or ‘$$$’ or ‘$$’ or ‘$’ 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, but specificity and exclusivity are the opposites of scalability — and scalability is key to a technology startup. By breaking down their deals into tons of small categories, the company has created a thousand different chicken and egg problems for themselves: 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.

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’s mobile couponing product.  Why not partner with a company like loopt?

Basically, the mobile couponing business is an extremely tough business to scale well.  I like mobile spinach’s gusto and ‘dial-down’ approach, but at the end of the day I’m still vexed by these three issues:

1)  the high cost of sending SMS text messages.
2) the difficulty of convincing consumers to share their mobile phone numbers.
3) the high overhead costs of closing numerous small local deals.

This last issue concerns all types of hyperlocal companies:  Yelp, Outside.in, Patch.com, GoMobo, Grubhub, and Yodle just to name a few.

Local is a tough business.

As usual, readers, I’d love to hear your comments and questions.  So let’s have ‘em!

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No, this isn’t some kind of bestiality confession.  I’m talking about Aardvark — a 15-person San Francisco startup made up largely of ex-Googlers and backed by $6 million from top investors.  Like many relationships, this one started with a friend’s introduction.  In February, Omar Christidis had been waxing poetic about Aardvark — ‘vark for short — and soon I was begging to be set up.  A friend of Aardvark’s founder Max Ventilla, Omar was an early member of the service and gladly passed on an invite.

Unlike most online services, Aardvark’s focus isn’t on their website.  Instead, Aardvark lives on your buddy list. Like a good friend desperately in need of a social life, its green ‘available’ dot glows brightly 24/7.  When you IM a question to Aardvark, it goes digging for the answer.  First the service analyzes and categorizes the question, then — and this is the real magic — it routes the question to an ‘expert’ who responds, usually in a matter of minutes.

Does it work?  Hell yeah.  My first challenge posed to the service was to ask it something local.  After all, how many early aardvark users could possible live in my neighborhood?
me:
What’s the best bar in boerum hill, brooklyn?

aardvark:
Got it. I’m sending your question to someone who knows about *going out*
[6 minutes later]

aardvark:
(From Naomi/F/Brooklyn,NY, Re: *going out* )
I like the Brooklyn Inn on Bergen and Hoyt maybe. no food. just booze. local.

Wow, I was impressed. Not only was there another Aardvark user in my neighborhood, but she was online at that moment.  And helpful!  A day or two later, Aardvark posed its first question to me from a user in State College, PA asking “How much is your iPhone monthly bill?”  Aardvark sent me the perfect question and I was able to give an answer accurate to the penny…being helpful felt really good!

I continued to use aardvark over the next few weeks, asking progressively harder questions.  And each time, it stepped up its game.  One time I sent Aardvark a chunk of Objective C programming code — a bug had stumped my friend and I and also stumped the readers of a popular programming site.  Sending it to Aardvark was a last resort and pretty much a joke. But less than five minutes later, Aardvark sent back a one-line response that solved the bug. My question had been routed to Colin Barrett, creator of Adium (a popular aim/icq/msn messaging client) and master of all things Mac programming related.  We had a back-and-forth conversation through aardvark, and exchanged contact information which came in handy later.

At precisely this moment I realized Aardvark was much more than a simple ‘question answering service’.  It was an expert network.

Have you ever heard of the Gerson Lehrman Group (GLG)?  I hadn’t either until a friend started working there.  Essentially GLG connects corporations/investors to experts on very specific subject matters.

Perhaps a corporation is considering launching a new product that’s outside their core expertise.  They have questions and concerns about the launch which require an expert opinion.  They pay GLG gobs of money to play matchmaker.  GLG sorts through its database of 200,000 experts and sets up an interview/consultation between the the expert and the corporation. It’s big business. GLG’s 2008 revenues were $284 million.

Essentially, Aardvark is GLG for the little guy.  Or it’s GLG for the ‘long tail’ of questions.  Over the past few months, I’ve used Aardvark to consult with experts on all sorts of topics, not just to ask simple questions but to have entire discussions!  In addition to getting coding help, I’ve had hour long conversations about mobile micropayments with the Senior Mobile Product Manager at a major social networking site.  I also found a very helpful PR expert who discussed in detail with me how best to do press outreach for an upcoming project.  I’ve even used aardvark to have questions answered by lawyers and doctors.

Categories of Questions Asked (source: vark.com blog)

The key to Aardvark’s success is threefold:
1)  Intelligent routing. When aardvark asks me to answer a question, I’m happy to help.  I know aardvark isn’t wasting my time with irrelevant queries.

2)  A great network of ‘experts.’ The quality of Aardvark’s answers is only as good as the quality of its users.  Aardvark was started by a group of ex-googlers and as an invite-only service it has spread through real-world networks attracting a very impressively credentialed userbase.  Aardvark’s ‘refer’ feature is also brilliant.  I don’t know the answer to every question Aardvark poses to me.  But I probably know someone who knows the answer. Using the referral feature, I can pass the question to the right person.

3)  A gift economy and a feedback system.  Like Wikipedia or Yelp, users contribute to Aardvark because they have benefited from the service and want to give back.  Also, Aardvark encourages it’s users to type “thanks” in response to a useful answer and being helpful and getting thanked feels good.  (“thanks” also works as a feedback mechanism to help Aardvark identify its most helpful users and route questions better.)

As a former sociology major interested in social networks and information flow, I find Aardvark absolutely fascinating.  As an enterpreneurial person working on several projects and needing answers to dozens of questions, I’ve found the service to be priceless.  To monetize the service, Aardvark plans to fold in targeted advertising.  Should that not pan out, I have a feeling they could do just fine by creating a premium paid expert advice service.

As always, I would love to hear your thoughts about Aardvark and the emerging social search space.  And if you want to sign up or add me as a ‘friend,’ do so here.

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(This is the second of a two part post.   The first part can be found here)

The ubiquitous iPhone/iPod Touch devices are stealing Bug Labs’s thunder.  To understand why, realize that the iPod/iPhone are no longer mere personal music devices carried around in a pocket.  Instead, they’re increasingly purchased as stand-alone devices that serve a specific purpose.  For example, my brother in law’s restaurant (No 7 in Brooklyn) uses a dedicated iPod Touch with the Pandora app to play streaming music all night long.  Previously they would have needed XM Radio or a full computer to serve this same purpose.  Was the iPod Touch intended to be mounted on the wall of a restaurant (like a thermostat) and stream music for eternity?  Certainly not.  But at $200, it’s a great investment for this purpose.

Back to Bug Labs for a moment.  A classic product example the company has used: you want to build an alarm clock with GPS that wakes you up as you reach your destination on the train.  Great idea.  So you start with the base module (Bugbase, $249).  Then you add a GPS module (BUGlocate, $99).  And a speaker (BUGsound, $99).  Cost: about $450.  Can you do this with an Apple device?  Yes.  How?  Well folks, you probably guessed it — “There’s An App For That!” iNap costs 99c.

And if iNap didn’t exist, you could easily create it.  Most people associate Apple’s App Store with cheap games, free communication apps, and simple utilities.  But there’s an entire half of the App Store that the mainstream media has overlooked: high end apps. There are dozens of $200+ medical apps (Lexi-Comp), $450 salesforce software apps (MyAccountsToGo), and $900 camera surveillance apps (iRa Pro).

But wait, there’s more!  In addition to high end apps, there’s a whole other section of apps that will never see the light of day on the app store: enterprise apps. These Apps aren’t designed to be sold publicly — they’re proprietary in-house applications designed by companies and deployed for internal use under Apple’s enterprise distribution program.  The point is that the Apple devices are powerful and versatile enough to fit almost any need.

Consider the minimalist design of the iPod Touch and the iPhone and you start to realize they’re the ultimate hardware devices. A single large touchscreen. The screen is the primary input and output method.  It can be used to display a single large button.  Or a thousand small buttons.  Or just enough buttons to represent an on-screen keyboard.  Or to represent an on-screen piano keyboard.  The user interface is infinitely configurable.

Additionally, these devices have accelerometers, location awareness, audio inputs and outputs, memory storage, internet access.  To top it all off, there is a well documented and robust SDK (software development kit) and a very active community of developers.  And the devices are cheap.  An iPod touch retails for around $200.

Bug Labs’ saving grace right now is that their hardware itself is open-source, modular,  and infinitely configurable.  Can you add a temperature sensor to an iPod touch?  No.  But it’s coming. When Apple announced their iPhone/iPod 3.0 OS due out this summer, the addition of ‘Copy/Paste’ stole the headlines.  But tucked quietly into the announcement was the fact that these devices will soon be able to interact freely with the outside world through bluetooth and via the devices’ 30 pin dock connector.  That opens an entirely new marketplace: companies creating custom accessories or interfaces for talking to existing devices.  This is a game changer.

Previously, the iPod Touch and the iPhone devices could only interact with external speaker docks.  But now, the consumer, business, and scientific applications are endless. Expect the generic devices to come first: input devices (external keyboards, game controllers), output devices (monitors, LCD display boards), readers (bar codes, RFID, infrared), sensors (temperature, water, heat, weight, chemical).  Soon, more specialized accessories serving different market verticals will follow: medical equipment, sound mixing boards, lighting control, video production equipment etc.

Are you starting to see why I’m worried for Bug Labs? There are 37 million iPod Touch and iPhones in the wild and most people are very comfortable using the devices.  They’re extremely powerful hardware devices.  They’re cheap and readily available.  The user interface is infinitely configurable.  They support powerful custom software development and in house application deployment.  There’s already a thriving high end market for software on apple devices.  With the advent of custom hardware accessories and interfaces, Apple devices will become the dominant platform for interacting and controlling all sorts of equipment across many verticals.  Bug Labs’ is going to have to change strategy quickly.  They’ll need to shift their goal from creating the dominant open source hardware platform and start focusing on building around the Apple devices.  A recent article suggests that this is already happening.

Still need convincing about Apple’s upcoming dominance?  Check the latest edition of Newsweek:  The Military is using the iPod Touch as a handheld field device.  Amazing.

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Greg Yardley, CEO of Pinch Media gave a fascinating presentation at last night’s NYC iPhone Developer Meetup.  Greg’s slides were chock full of numbers and data gathered by Pinch Media’s iPhone analytics platform.  As you might expect, I was in heaven.

Greg demonstrated his evidence that a free ad-supported app rarely earns more than a 99c app. After Apple’s 30% cut, this 99c becomes 70c.  So what does it take to make 70 cents through advertising?

The Pinch Media numbers show that free apps, as a category, tend to be used 6.6 times more often than paid apps (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 — the average app lifetime is 12 runs.

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.  So the question becomes “Can the average free application make up 70c in advertising revenue across 80 usage sessions?”

Greg’s answer: “Hell No.” Assuming one ad is shown per each session, this requires a CPM of $8.75.  Unfortunately, typical CPMs are 50c – $2.00, far below the point required to match the paid app’s revenue.  Unless your app can serve 18 ads per session (assuming a worst case 50c CPM), or there’s some especially ‘sticky’ property that makes users reliably use your app repeatedly, Greg concludes that charging for your app is generally a good idea.

Slides from the presentation below:

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