I took this piece of copy directly from the 37 Signals blog. When it comes to websites, it’s what often the one thing we really need to break through. I also think it is why ‘free’ on the web just wont go away. It’s something web startups just can’t ignore.
The Network Effect: The network effect occurs when the value of a particular good or service increases for both new and existing users as more people use that good or service. It can also occur when other firms design products that compliment an existing product, thereby enhancing that product’s value. For example, the fact that there are literally millions of people using eBay is the thing that both makes eBay’s service incredibly valuable and makes it all but impossible for another company to duplicate its service.
1. Technology is easy – getting customers to pay you is outrageously difficult.
When was the last time you heard about a web startup failing because the product didn’t work? Almost never. With the greatest respect to all the hackers and engineers out there coding away, making a product do what you want is simply a function of time. Spend enough development time on it, and you can write code to do almost anything you want. Getting a customer to pay you some money for that feature you just added? That’s an entirely different proposition. The vast majority of web startups fail because they don’t find enough customers, at the right price and in enough time before they run out of cash. If we spend as much time on marketing your startup as you do on writing and shipping your code, and we just might beat the odds.
2. Customers can always choose to do nothing
When pitching a prospect we are generally trying to convince them to do one of two things:
(i) Leave a competitor and join you
(ii) Stop doing nothing about their pain problem and join you
Who knew that getting them to leave a competitor was often easier than getting them to stop doing nothing? At least if they are using a competitor they recognise that they have a problem that needs solving! The truth is, many prospects are indecisive, stagnant, glacial, apathetic, unwilling, and unmotivated. Demonstrating your product and then asking for the sale is just as likely to be met with a yawn and a scratch of the arse as it is with a chequebook. If you understand how difficult the process is, then there is a good chance you will approach it with the right amount of preparation and effort.
3. Financial models are fantasy
Their is one good reason to construct a financial model prior to having any real customer data. Do it to prove to yourself that the fundamentals of your model will produce a profitable business over time. Think of it as a sanity check. Once you are happy that the model works in theory, throw the spreadsheet away. Never look at it again, and for christ sake don’t go out and try and raise investment funds off the back of it (guilty as charged!). Just launch your product and get as much real live data as you can. Months later you can giggle about how wrong your projections were, but at least you won’t be making life altering decisions based on nonsense.
4. There is no replacement for quality user testing
User testing pays for itself many times over. This doesn’t mean getting your mates over to play with your creation in return for a 6 pack. It means getting real life customers/strangers to use your product while you watch. True story. Our startup is an online event registration solution that allows customers to sell tickets and accept registrations for any sized event. Three months after launch, we sat and watched via web cam while a Canadian tester spent 15 MINUTES just trying to create an account. In one of our releases, we had cannily decided not to display a “register button” to anyone using Internet Explorer. No-one using this browser could get in and use our product, and it had been that way for over a week. He eventually managed to get in, but man was he pissed!
What else do you wish you had known before you did your own web startup?
Post by Scott Handsaker founder of Eventarc
Humans are compelled to count. We count everything. Days, weeks, months, years, birthdays, money in the bank, salary levels, years of experience. It’s part of the human condition, maybe it helped us evolve to a civilised existence .
As startup entrepreneurs we need to let our people count something. Whether it’s the savings they made or they friends they have, there needs to be a way for them to keep track. So our people know they have made progress. Commerce is an anthropological game of football. So we must keep score. But it must go beyond the corporate scoreboard of profit, share price, turnover, number of employees… it has to be an audience focused score. Like followers on twitter. It has to be about them, not us, it’s how humans roll.
Our websites are no different to perishable goods at a supermarket. It’s not surprising given how well trained we are to check everything is up to date. From milk to computer hardware we want the latest version available.
So when someone finds your website via Google and the last blog entry is from last year, or the Copyright legal date is 2008, it’s a bit like the milk which got lost at the back of the fridge. We won’t touch it, there’s no limit of options and it is safer to elsewhere.
The good news for web entrepreneurs is this: It’s easy to keep things current. A simple blog entry once a week. A twitter feed in your side bar. Anything which shows your people you’re still in the game. That you have a pulse.