Startable – Healy Jones’ & Prasad Thammineni’s Blog

Lots of reports of the end of Massachusetts as a startup hub due to the fact that NYC raised more venture funding in Q3 2011 than Boston.

First of all, I am not upset that New York is becoming a real startup hub. Let’s got those technologists out of the backrooms of hedge funds and out there making some awesome products that people can actually use!

Secondly, I don’t think that there is a zero sum game here; if more and more companies do well there should be enough capital to go around.

Third, Mass has been huge in healthcare investing and has been less than stellar in Technology investments for a while now. As healthcare venture capital investments have dropped pretty agressively it makes sense that Massachusetts would dip.

IMHO, the thing that Massachusetts needs now to get it’s tech/internet mojo back is to have a few major exits take place – followed by the employees of those companies starting the next generation of startups + the local VCs recycling money back into the area.

I see some great companies in Boston that are ripe for doing just this. I hope that we see success with a few of them and can get the startup juices flowing again. I feel that the NYC to Boston Acela line could be the next startup super cluster, and I’d like Boston to pull its weight. Check out the CBinsights report for all the details; it’s the source of these charts.

There is a well crafted piece on Business Insider on the new iPhone 4S announcement and how it actually may make a lot of sense that Apple did not release an iPhone 5.

The thinking is that perhaps this phone is not aimed at current owners of the iPhone 4, since they are still bound by their existing 2 year mobile contracts. Instead, it says:

So the 4S isn’t aimed at these folks. It’s aimed at the other three categories of iPhone 4S buyers:

• Pre-iPhone 4 iPhone users (~70 million of them)
• Non-smartphone users (1+ billion, who can now get a 3GS for free, if price is an issue)
• Non-iPhone smartphone users (Blackberry, Android, Nokia)

The release of the forthcoming iPhone 5, meanwhile, which presumably will be a more radical upgrade from the iPhone 4, will likely be timed to appeal directly to the ~70 million iPhone 4 owners who will just then be starting to come off their two-year contracts. The iPhone 4 was released in the early summer of 2010. So the two-year window for these contracts will begin to roll off in the summer of 2012 (next June).

Hmm. Well, maybe that is a possible strategy… Anyways, it makes some sense. Who knows though!

Do we finally have a real competitor to the iPad? Is Amazon going to do it!?!? I’m getting pretty excited here.

Don’t get me wrong, I love my iPad (actually it’s my company’s, but hey). However, the world needs at least one legitimate competitor to the iPad to keep Apple honest and to push the industry to continue to innovate.

Preliminary sales numbers for Amazon’s Fire are supposedly very impressive. Mashable is reporting:

More than 250,000 Kindle Fires have been pre-ordered since Amazon announced the new tablet computer last Wednesday, according to a report from Cult of Android.

The blog says a “verified source” within Amazon provided screenshots of the company’s internal inventory system. The screenshots show the Kindle Fire has been pre-ordered at an average rate of 50,000 units per day.

That’s legit if it’s true! Note that I couldn’t link to the original source, Cult of Android, because their blog seems to be down. This is big news… Ah, wait, it’s working for me now:

These leaked shoots show that orders for Amazon’s Android-based tablet are racking up at an average rate of over 2,000 units per hour, or over 50,000 per day… Those numbers make the Kindle Fire’s launch likely to be the biggest tablet launch in history, beating both the iPad and iPad 2 in first month sales. The original iPad sold 300,000 units on April 3, 2010, its first day of availability. In the first month, iPad sales amounted to over a million units. By the time the iPad 2 came around in March of this year, Apple managed to rack up an estimated 2.5 million units in first month of sales.

What does this mean, beyond the fact that there may be another real player in the tablet space? I think that it shows that PRICE really matters in the tablet space. $199 is a sweet spot, perhaps. And remember that HP’s tablet flew off the shelves when the price was really reduced… it looks like there is a market for lower priced tablets. Of course, this follows along with the Google Android strategy of having a LOT of low end phones running on the software.

What will it mean for app developers? 1) Get in the Amazon Android marketplace. 2) Get ready for another form factor + potentially highly modified Android OS. 3) Get your hands on one of these devices ASAP so you can get a feel for how your applications will run on it.

As Amazon announced their new tablets they also mentioned a new browser they had built – Amazon Silk. Silk promises to be the fastest browser ever, especially on a mobile device, because it uses Amazon’s cloud services to do a lot of the backend computing. In other words, your little tablet won’t have to do a lot of requests over the network and then work some computationally (sort of) difficult stuff to render web pages as you browse using Silk.

It’s an interesting idea, and one that is described pretty well in this video by Amazon:

Amazon Silk Video

What Silk Means

So why is Amazon, a company that now sells devices, trying to make the workload on your device less? I mean, shouldn’t they want to follow Apple’s iCloud strategy and push the compute to the device so people feel like they need to buy a new one every year as it gets slower and slower?? Why pay all that money for compute costs in the cloud (OK, it’s not that expensive for Amazon since they own the cloud, but still, it’s not free)?

DATA

I was going to spend the time writing up how brilliant this was – but Chris Espinosa has already written it better than I ever could; check out his post on the topic:

The “split browser” notion is that Amazon will use its EC2 back end to pre-cache user web browsing, using its fat back-end pipes to grab all the web content at once so the lightweight Fire-based browser has to only download one simple stream from Amazon’s servers. But what this means is that Amazon will capture and control every Web transaction performed by Fire users. Every page they see, every link they follow, every click they make, every ad they see is going to be intermediated by one of the largest server farms on the planet. People who cringe at the data-mining implications of the Facebook Timeline ought to be just floored by the magnitude of Amazon’s opportunity here. Amazon now has what every storefront lusts for: the knowledge of what other stores your customers are shopping in and what prices they’re being offered there. What’s more, Amazon is getting this not by expensive, proactive scraping the Web, like Google has to do; they’re getting it passively by offering a simple caching service, and letting Fire users do the hard work of crawling the Web. In essence the Fire user base is Amazon’s Mechanical Turk, scraping the Web for free and providing Amazon with the most valuable cache of user behavior in existence.

It’s awesome. And for sure worth the expense.

Now they just have to get people using the browser! I’m excited to try it out…

Finally, a funny:

Check out the recommended videos alongside the Amazon Silk Video

If I thought Google was smarter I’d think they’d put there there on purpose!

One of my sysadmins pointed out a great post from yesterday on using a decoy on your pricing page. If done well this can be a great strategy.

I’ve used this decoy pricing tactic on OfficeDrop’s pricing pages for a while. In particular, our digital filing pricing page has an expensive plan that has nicely increased overall conversion on the page.

The main result of this decoy is increased conversion on the page. In otherwords, a higher number & percent of visitors to the page pick a plan and become an OfficeDrop user. It hasn’t really changed the MIX of plans (very few people pick the expensive plan and the same % of people pick the other plans). But I consider the decoy plan a success because it’s getting more people into our funnel.

You can see the pop here when we added a decoy pricing plan to our standard digital filing pricing page. This chart is the % of visitors who visited the page and then signed up for a plan. I.e. the conversion rate of the page. Note that there is a little dip in the beginning that has nothing to do with pricing; it’s a data error. The way to look at this w/o the data error is the two little peaks on the left are close to the pre-decoy conversion rate average; the hump on the rigth is the new average post addition of the decoy pricing plan.

What the Decoy Pricing Plan Looks Like

The decoy pricing is the “ScanPro” “ScanFive” plan on the right. (Thanks for the typo catch Pete!)

Decoy Pricing Plan

It’s designed to be expensive and to make clear that we’ve got the ability to support additional users in the plans… it’s not really clicked that often.

Anyways, check out the post I linked to above. You’ll find it very solid, and it explains why a decoy plan works.

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