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Instagram should thank Apple
At first I was like…WTF…1 billion dollars. That seems outrageous for a 7 member startup that has $0 revenue. I even posted my initial reaction on Twitter.
So with $0 in revenue you can sell for $1 Billion dollars. We live in interesting times.
— Sahil Parikh (@sahilparikh) April 9, 2012
But, then I started to think about this.My initial question was why didn’t Facebook spend less than $10 million (which is still a lot) to revamp (speed up, single-step upload etc.) the part of their mobile app that did photo-sharing. They don’t have a traffic/user problem since a majority of the 30 million Instragram users probably are also Facebook users. So, if they fix their app experience then people might start sharing more photos and they could do away with the Instagram aquisition.
You know what, I am sure they thought about this.
Then came the question of the whopping $1 billion. At first the number seems outrageous. But if you are Facebook valued at $100 billion dollars and waiting to go IPO then this is chump change. Especially, when Facebook would probably skyrocket to $150 billion within the first month going IPO, $1 billion is not much.
So, why did they buy?
To please investors, Facebook has to do well on mobiles (I have read that Facebook is not growing as fast as they should) and Instagram was their closest competition (imagine Facebook without photos!). Instagram had built a strong brand and a very loyal fan following of 30 million users in a year - that is no joke! Their app was not just a photo sharing app. It had soul and brand loyalty. That in itself is worth a lot to Facebook. Besides, their Android app was downloaded 1 million times in 24 hours. If Facebook didn’t go for the kill then someone (Google?) might have beaten them to the punch. It is a high stakes pressure game when you are Facebook, Google or Twitter. Or, it’s all about having the right connections.
Kevin Systrom (founder of Instagram) has been around and well connected…
Here is an excerpt from TechCrunch:
Both Systrom and Krieger graduated from Stanford and were a part of the Mayfield Fellows Program – a joint program between the Stanford Technology Ventures Program and the Mayfield Fund. Most recently, Systrom was working at NextStop (recently acquired by Facebook) while Krieger was at Meebo. Before NextStop, Systrom spent a couple of years at Google, and before that he was an intern at Odeo — the company that eventually stepped aside to give birth to Twitter. Systrom noted he actually shared a desk with Twitter creator Jack Dorsey back in the day, and that Dorsey has been very helpful with Instagram/Burbn.”
And if it wasn’t for the iPhone, Instagram would never happen. Everyone, say “Thank you Apple”.
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You win some, you lose some. Common reasons for churn in a SaaS business.
You work rigorously at getting your product shipped and aquiring customers. Then, after a month, all of a sudden you start seeing cancellations. This is one of the most frustrating parts of running a SaaS business. To add to the wound you don’t know why people cancel; UNLESS you ask them.We recently did a compilation of all the reasons why customers cancel their subscription for our app DeskAway. It is heartbreaking to see them go but that’s how life is - you win some, you lose some.
(in random order)
Lack of featuresOne of the biggest drawbacks is that there is no task dependency. Our projects are complex and we are used to this.
This is one of the most common reason why people cancel. People want stuff that you don’t have. They subscribed thinking you may develop the feature but quit if they don’t see it happen. I have learnt that you can’t please everyone when running a SaaS business. I do believe in a feature-rich app (less is always less, more is great) but adding features (just to please customers) that don’t gel with the vision of your app is a strict no-no.
“I don’t know the key to success, but the key to failure is trying to please everybody.” - Bill Cosby
Lack of adoptionIt did not seem prudent to continue to spend money on something that was not being used. There was a very slow adoption rate on our side and we should have pushed more. We may revisit your product in the future.
This is common with collaborative apps - when you need a commitment to use from everyone in the team. I feel this has been the biggest challenge. Teams that use project management tools (as opposed to the ones that are satisfied with collaborating over email) have a different attitude and understanding towards using a system-driven approach to getting work done. They care about being on top of their work and having a transparent and smooth workflow.
I want a swiss-army knifeIt’s great for project management; but I also need customer management. If it was more widget/gadget based, it may have met our needs.
This somewhat ties in with the lack of features point above. People pay for the app but realize that they want CRM, Email Marketing and a gazzilion other things. There is nothing you can do here but to wish them good luck cause they are definitely not your target audience (unless if you plan to bloat your app).
Closing down the companyWe cancelled because we are moving towards closing down the company and I was very happy with your product. We used it all the time.
Absolutely nothing that you can do here. Hope that everyone using your tool starts their own venture (or join other companies) and yours is the solution they choose to use.
Using a competitor’s productWe are now using INSERT COMPETITOR that is free. It offers very little support in providing multiple project / team management, but my it fits very well into my teams ideas of what an individual task management app should do. So through diplomatic process, we’ve been using it and I’ve been supplementing it with other apps. I researched A LOT of project management apps out there and was happy with my choice to initially choose DeskAway.
Most people jump ship if they see something that is free. That is ok and we are completly fine with that. In this world you get what you pay for.
What we were working on is ‘frozen’It has nothing to do with your service, the project is frozen so currently I do not use it.
Perfectly fine. We have seen people restart their subscriptions once their projects get a go-ahead.
Budget CutsI liked your product/service. It’s just really tight right now and I had to make cuts.
We started out thinking that with such a low price-point there is no way companies will find us expensive. However, when you are talking about tiny teams of 2–5 people even $25 a month is an accountable monthly expense. Allow these teams to downgrade to a free plan and still use the app.
The app evangelist left the company“It was simply that as a group we were not using it. This was not due to the lack of the deskaway project but more changes in our operational procedures.”
There are some companies that have one designated person that acts as a project manager and drives the adoption of the app within the teams. When he is gone things come falling apart.
I am paying for trying itYes, we have had people who would pay for the app even though we have a free 30-day trial. They would discontinue if it did not fit their needs for the above reasons.
Are there other reasons why people discontinue from your service? Would love to hear your thoughts in the comments below.
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Posterous Sold! What is means for consumers and SaaS startups
I moved my personal blog from self-hosted Wordpress to Posterous in December 2009. Being happy with the simplicity of Posterous I moved the DeskAway blog to its platform in early 2011. In 2010 my wife started blogging so I told her to use Posterous (now she doesn’t trust free web services these days). Posterous launched with big promises on how they were going to change the way people blog and how easy is it to blog via email using their platform.
Their USP was simplicity - seting up a blog (just send an email and you are all setup) is a piece of cake. WordPress was too feature-rich, heavy and Posterous was simple, clutter-free and swift. I could see where they were going and thought they had a very bright future. In early 2010 I interviewed one of their founders, Sachin, for my book. I have a chapter on how easy is it for a non-tech savvy person to setup a blog today.
Posterous was well funded by investors. They raised a total of $10.1 million for a free service that was never monetized. Accordingly to me, they failed to improve their software over the last 2 years. Their inclusion of Spaces last year was a mess. We didn’t need a news feed and all that jazz. Couldn’t they just keep the service simple and stick to their USP? At that time I remember thinking to myself that having a lot of money is a bad thing - you start making changes to your software which don’t really require those changes. Fixing something that isn’t broken is never a good idea. Wouldn’t it be better if they spent time finding a way to get profitable? Or, maybe that wasn’t the plan or they simply couldn’t, as Tumblr and Wordpress beating down their neck.
(Note: Luckily, I moved it to Tumblr in January 2012. Maybe it was a premonition :))
Before I rant more, here are my thoughts on Posterous shutting down…
Good accomplishment for the founding team. A sale to a successful company like Twitter is great thing to have on your track record. I don’t know if they made a lot of money though. Anyone know the deal size?
Such a thing generally sucks for users who are now forced to move to another service without having an export tool from the app. Note to self: make sure to build an export functionality for anything that my company builds.
Their announcement was not communicated well. Either be direct that you won’t be supporting the service in the near future but never ever leave your users guessing. These were the same users who used your service and helped you get aquired. Respect them.
Building a business that is profitable makes so much sense than just going the free route and spending investor money. Dynamics change when you have paying customers. You take business seriously. You’d better make sure you actually take care of them and have a solid backup plan if you ever are going to shut down (instead of an immature announcement). Somehow I have this feeling where free apps don’t much care about their users. Summify did it last month. Amy Hoy echos similar sentiments here on her blog Unicorn Free with a post Posterous Down! The Startup Graveyard Continues to Fill Up.
Apps will come and go. You can’t expect every company to stick around for years. Some will figure it out and some won’t. We will all forget about Posterous in a few months. If you are a consumer then there is nothing you can do but hope that the service you use sticks around for long or helps you transition to another provider (like how Newsberry did) if they go down. If you are a SaaS provider then find a way to get profitable instead of burning through someone else’s money (cause you don’t have leverage when the money runs out). If you can’t and have to sell (I am assuming this was the case with Posterous) then communicate well and help your users to transition (if the app is going to be shut down for good). Build a export/import tool to connect your service with other popular apps, before making the announcement that ‘users may need to move and they are figuring out a way that users can get their data out.’
My prediction is that in the next 2-3 years we will see more Summifys and Posterous-like startups going down when…
- funding runs out
- investors want an exit
- unable to find a revenue model
- companies get acquired for talent (and the product shuts down)
- entrepreneurs get burnt out
Maybe, there is an opportunity for startups to help users of “distressed, soon to be shut down” products to jump ship. Who knows, but I am off to find a new home for the DeskAway blog.
March 21 Update: Came across https://exportmyposts.jazzychad.net/ - a tool to export your posterous blogs.
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10 insights on building a web product company (iWeekend Mumbai 2011)
via slideshare.netMy presentation at iWeekend 2011 (Feb 5th) at the IIT Mumbai campus.
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A Bubble? You can get funded or bought out too….
Daily, I am reminded of the early 2000 and I am pretty sure there is a bubble brewing (or even about to burst) in web-o-app-land. There is an app for everything just like when we had websites for animals and pets. I think this time with the ‘social networks’ it seems a bit more narcissistic.
Check this out…
Viral app threewords.me that lets you solicit three-word responses from your friends is making the rounds and probably even gonna get funded by some angel/VC. Read More
A splash-page startup (umm, that is an app with just 1 page) About.me gets aquired by AOL after financing an earlier round for $425,000. Read More
WTF (I am happy for them but are these real businesses?)
Maybe, I am completely wrong but my hunch tells me that when eyeball-startups-that-are-just-features get aquired or funded then there is something wierd happening. What do you’ll make of all this?
