Startable – Healy Jones’ & Prasad Thammineni’s Blog

Lincoln Murphy, the well known SaaS Marketing guy, got pretty upset at a recent TechCrunch piece on the freemium pricing strategy that posted this weekend. Lincoln says (I’m on his email newsletter list; it’s pretty good): “In a nutshell the Complete Guide to Freemium on TechCrunch is a post by someone who got lucky enough to get their post accepted so he can get a backlink to his site from TechCrunch and where he takes the results of studies and some words from high-profile VCs and weaves it together into a post for the TMZ of the tech industry.”

Ouch. That’s a little harsh. The article isn’t bad at all. The conclusion is 100% great, actually.

What is Freemium?

However, I don’t think it’s the Ultimate Guide to what is a actually a pretty complicated pricing strategy. I happen to disagree with the author’s ideas that a time based free trial = freemium. I can’t tell if my disagreement is a big deal or not – his company, FutureSimple, has a free trial offer, so it’s hard to know how much of the piece is using that as the basis for the post vs. a couple of professors he references. I disagree with the idea that a free trial is freemium so much because OfficeDrop recently made the switch from a free trial to having a free forever plan and we called it “going freemium.”

My definition of freemium is that a user will have the opportunity to use the service/software/whatever forever without having to pay for it. It may be a limited plan or limited features, it may be ad supported; whatever. It just means you can use it for as long as you’d like without paying. FreshBooks has a freemium model, but you run out of “free” pretty quickly. You can jump through hoops to keep it free, but most likely you’ll upgrade. A free trial that expires after a set number of days doesn’t meet my definition of freemium.

OfficeDrop’s free plan is driven by our mobile distribution strategy. I write a little bit about why we think apps are taking over here. But you should listen to my conversation with Lincoln – I call it “Healy Jones on Freemium.” Our free plan is a free forever plan, with some upgrade triggers baked in – search limits, storage limits, OCR limits. But it’s a pretty good product for free; we are the only company offering free high quality OCR for scanned images coupled with storage. People seem to like the plan… and they also seem to like to upgrade to paid plans. We like that part for sure!

Lincoln is putting on a webinar on kicking butt with your company’s free trials model. I think he’s got some good stuff, so I’d suggest you register!

Waiting until the last possible moment before I close the storm windows for the approaching hurricane – so here are a couple of links.

A take on Tim Cook

An acquaintance, Alex Bain, works at Apple and has a post up on his meetings with Tim Cook. It seems that he’s meet with him once a week, and so it’s interesting to hear his take on Tim’s leadership style. Very cool look inside the now most powerful man in tech’s leadership style. (Thanks to Kenny Kellogg for pointing out Alex’s post.)

Updating Mac Apps

I’m proud of a post over on the OfficeDrop blog about how to update apps purchased in the Mac App Store. You’d be surprised at how many people ignore the update icon (or who don’t know how to update their apps!). Anyway, hopefully this how to will make it easier for people to update their apps and perhaps not call our customer service to ask about how to do it. OfficeDrop’s ScanDrop Mac Scanner Software really does work better when it’s the most up to date version!

Tablet growth is going gangbusters! Bizrate Insights has a new report that shows tablet growth at a 51% CAGR for the next few years (I can’t find the piece, just a write up on online marketing trends here.) A slightly more dated chart shows how fast tablets are taking off:

Online Marketing Tends reports that:

“According to a new report by Forrester Research, in partnership with Bizrate Insights, the number of Americans owning tablet devices is forecast to increase at a compound annual growth rate of 51% between 2010 and 2015, while tablet commerce is expected to grow rapidly over the same period. 9% of surveyed online shoppers say they own a tablet device; among them, 78% own a smartphone as well, while 22% of tablet owners (2% of online shoppers) own a tablet only.”

That’s pretty quick. I’m starting to believe that the future will be dominated by tablets, at least as far as small business usage goes. And looks like Prasad Thammenini, my intrepid sometimes co-blogger, agrees. Here he is with a nifty new iPad2 keyboard that he just purchased:

Came across a study by a company called Comparz and found the following quote interesting:

Only 20% or less of SMBs found vendor websites and conversation useful. So what are SMB’s looking for? Over 90% of business users said that user reviews and user ratings and rankings would be the strongest help in making vendor decisions. In addition, 84% indicated that decision guides outlining what to consider when purchasing a solution and would be useful. They also seek a community where they can chat online with similar buyers.

This goes along with my mobile app marketing strategy of getting existing power users to step up and review new versions of apps in app stores.

Yup, it’s me, Healy Jones, talking about the OfficeDrop cloud filing system switch to freemium with Lincoln Murphy of 16Ventures. Lincoln is that well known SaaS pricing guy, and we go over the switch OfficeDrop made from a pure web only service with a 60 day free trial to an app focused business with a freemium pricing model.

The switch in our pricing strategy has been pretty huge for OfficeDrop. It’s driving a lot of new user growth – both free and paid. It’s been only a month and a half since the switch and the change is clearly measurable with our analytics packages. So far, for our SaaS company, freemium seems to be working.

Check out the interview with on why OfficeDrop went Freemium here! Or simply watch the video embedded below.

Healy Jones with Lincoln Murphy on Freemium

Interesting research from Flurry again (they were the ones who put out the info that mobile app usage is topping regular web browsing). This time they have data showing that free or “freemium” app titles are generating more revenue than pure paid apps. From a MediaPost summary of the research:

Flurry shows that over the last six months, revenue from free-to-play game apps has overtaken that from paid apps. Among the top 100 grossing games in the App Store as of June, more than two-thirds (65%) of the revenue generated came from freemium games and 35% from paid games.

That’s nearly opposite the situation from six months ago, when paid game apps accounted for 61% of revenue and free titles, 39%. What’s changed since January? Peter Farago, vice president of marketing at Flurry, pointed out that Apple began counting in-app purchases toward app gross revenues at the end of 2010, reflecting the impact of that sales stream in its ranking of top-grossing titles.

Free apps generating more revenue than pure paid apps

So, this research is focused on games, but OfficeDrop is betting the same will be true for our b2b SaaS app. We switched to a freemium model earlier this week, mainly driven by the feedback we were getting in the app stores. App store people just expect to try stuff for free and don’t like free trials. We can’t get them to read the app description that talks about the free trial period; they just look at stars, download and then leave a nasty review without trying the service. Hopefully this freemium experiment will pay off for us. Initial web signups are promising, but it’s too early to tell!

I was recently quoted in a couple of places on how OfficeDrop treats customers, and also about how we made some mistakes when we first started the OfficeDrop Document Management Blog. It’s fun to speak with other bloggers and let them know some of the things I’m learning at OfficeDrop as we grow the business here! I can’t believe how much more effective I am today than I was just one year ago.

Ways to Keep Your Long-Term Customers Happy by Zendesk – For SaaS businesses, existing paying customer retention id critical, and OfficeDrop tries hard to keep our existing customers happy with our service. The Zendesk blog post talks about how we ask “best customers for advice and involves them in big decisions.” And also “OfficeDrop also involves existing customers in new product development, in the form of beta testing. “They are excited to see the new stuff that we are cooking up, and it is fun and exciting for them to be the very first people to try new things.””

Top 5 Mistakes to Avoid on Your Company’s Blog on Mashable – This is a great post on Mashable about simple mistakes company’s make when they start blogging. We are quoted about how we originally did not effectively link back to the OfficeDrop main site when we first started blogging, but there are some other great tips on here about how to be a better blogger.

Very unrelated links, but both I found to be very interesting.

Web Design – Google and an Example

An amazing piece by Justin O’Beirne on why Google Maps is so much more readable than the competition. He must have put a massive amount of work in to this post. I love the modifications he makes to Bing’s maps to make them better based on what he sees Google doing. Awesome stuff.

Taking Money off the Table to Boost Growth

One of the venture firms I worked for, Summit Partners, used to say that letting a founder take a little money off the table often boosted the company’s growth rate. I know this may sound counter-intuitive – if the founder just got $, won’t they become a lazy fat cat? Roger Ehrenberg has a great post on letting your winners run – even if that means letting the founders take a little money off the table prior to the real exit. I think he explains how a little liquidity can give the founders the confidence to go for the big time with their company.

OfficeDrop co-founder Anand Rajaram has posted his second piece on Performable’s blog about how OfficeDrop used user testing during our site redesign to increase our site’s conversion numbers.

I’ll be speaking at a very cool event next week in Cambridge on the 5th in the evening. The event is called “Customer Development: The Second Decade — with Steve Blank’s co-author Bob Dorf.” Come out and hear some pretty interesting folks talk about startup marketing. The main speaker will be Bob Dorf, and the event is moderated by Simeon Simeonov. Other speakers include:

• David Cancel, serial entrepreneur and founder of Compete, Lookery, Ghostery and Performable.
• Andy Moss, founder and CEO of ESMZone.
• Andy Greenawalt, founder and CEO of Perimeter eSecurity and Continuity.net.
• Healy Jones, founder of Startable and VP Marketing at OfficeDrop.
• Rob May, founder and CEO of Backupify.

The event is free (sponsored by General Catalyst, a local venture capital firm.) To register for the customer development event click here. The event will start at 6 PM and will be hosted at Microsoft’s NERD Center, One Memorial Drive in Cambridge, MA. Everyone should come!!

The conference is organized by General Catalyst Partners and FastIgnite. Bob Dorf will provide an exclusive peek “under the covers” at some of the many new rules and advancements that Steve Blank, Bob and the ecosystem of thousands of entrepreneur, marketer and investor practitioners have developed over the past several years. The event will feature a keynote by Bob, guest appearances by entrepreneurs and executives who have successfully applied customer development in their businesses and a discussion led by General Catalyst Executive in Residence and FastIgnite CEO Simeon Simeonov.