Monthly Archives: April 2011

you can compete with free

Marco Arment explains the economics of free, as they apply at instapaper. 

Last fall, I conducted an experiment: I quietly removed Instapaper Free from the App Store1 for three days, leaving only the full, $4.99 Instapaper app. Not only did sales increase incrementally, but nobody seemed to notice.

On March 12, knowing I was heading into very strong sales from the iPad 2’s launch, I pulled Free again, this time for a month. Again, nobody noticed, and sales increased (although it’s hard to say which portion of the increase, if any, is attributable to Free’s absence, since most of it is from the iPad 2’s launch).

This break went so well that I pushed the return date back by another month. I may keep it out indefinitely, effectively discontinuing Instapaper Free.

Here’s why:

Background

The paid app has never been “on sale”. It launched in the fall of 2008 at $9.99, and in June 2009, I dropped the price to $4.99, where it remains. I have no plans to drop it further.2

When it was still available, Instapaper Free was downloaded about 3 times more often than the paid app. This is a very good ratio, especially given such an “expensive” paid app.

The iPad represents about half of my business, but I’ve never offered a free iPad app, and almost nobody has ever asked for one. (Instapaper Free is iPhone-only. Like most iPhone apps, it will run in the iPad’s “2X” simulator, but it’s terrible.)

Bad economics

Maintaining a second configuration of the app incurs direct, significant costs in development and support. Furthermore, the Instapaper web service that powers the app costs a good amount of money and time to operate every month. So Free users have a direct cost to me…

via Why Instapaper Free is taking an extended vacation – Marco.org.

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on leadership during wartime

This very thoughtful and thought provoking piece from Marty Cagan. By thinking about the innovator’s dilemma from the analogy of wartime leadership. 

…So how do you prepare for war?

Preparing for war means moving to a strong product culture, one where we can learn quickly.  Not just minor learnings like we do when we optimize, but fundamental learnings that enable entire new sources of revenue.

It means getting good at product discovery – both qualitative (especially user prototyping and user testing) and quantitative (especially live-data prototypes and split testing).

It means getting serious about user experience design.  It means utilizing your best engineers for more than just coding.

Preparing for war also means getting clarity on roles and responsibilities, and raising the bar for everyone in the company.  It means abandoning such luxuries as a consensus culture in favor of a truly collaborative culture, with true empowerment but also accountability.

These are some of the fundamentals, but preparing for war mostly means getting serious about the products and services we produce for our customers.

For what it’s worth, my view is that at least in the technology industry, I’m not sure we’ll ever enjoy “peacetime” again.  I say that because the industry moves and adapts so quickly now, that I don’t see any leadership position as safe.  Staying on top means a relentless focus on customers and continuous innovation.

via Preparing For War.

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a post-american economy

Hmmm. The IMF tells me that five years from now China will eclipse the US. in economic status. 

According to the IMF forecast, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.

Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.

via IMF bombshell: Age of America nears end Brett Arends’ ROI – MarketWatch.

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on finding a great bargain

…But let’s take the “Android hypothesis” (i.e. that Android is causal to Apple’s share price) seriously and analyze it. How could the impact be measured?

Since Apple is trading at a fraction of (a) historic multiple (b) multiple based on growth (c) comparable companies’ multiples then we can assume that a “normal” valuation would be twice the current (i.e. a multiple of about 32). That would still be a discount to growth and history but it would begin to match some of the comparables. A doubling of the P/E would be a good start.

But a multiple of 32 would imply a doubling of market cap, which means that the Android hypothesis is causing the evaporation of about $300 billion in future profits. So it stands to reason that it’s responsible for a $300 billion destruction of Apple shareholder value.

That’s an interesting number since Google itself is only worth about $169 billion.

The measurement then presents a remedy: If Apple bought Google (it already has a third of its value in cash) and it shut down Android, it could create $300 billion in value. If could even throw away all of Google and still walk out with a profit.

Seems like a great bargain.

via Is Android responsible for Apple’s deep market discount? | asymco.

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it’s like better than gold

Making tangible currency digital seems about due in the innovation cycle. But this value proposition ought to motivate hackers, as much as consumers of the currency to opt in. It seems an odd claim to make that a digital currency would be harder to forge that a ‘shiny metal’ design of old. 

Perhaps it is hard to crack the code. But once cracked… forgers around the world will share the same tooling, which will quickly become a free service. It would seem like a gift to the black market; a digital currency to call their own.

…Bitcoin is different: It wholly replaces state-backed currencies with a digital version that’s tougher to forge, cuts across international boundaries, can be stored on your hard drive instead of in a bank, and–perhaps most importantly to many of Bitcoin’s users–isn’t subject to the inflationary whim of whatever Federal Reserve chief decides to print more money.

“Bitcoin is designed to bring us back to a decentralized currency of the people,” says Andresen, a 44-year-old software developer and entrepreneur based in Amherst, Mass. “This is like better gold than gold.”

As with shiny-metal-backed currencies, Bitcoins derive their value partly through their scarcity, which is defined not by how much can be dug up with shovels but by a cryptographic lottery. Anyone can get Bitcoins without paying cash for them by downloading and running Bitcoin’s “mining” program. The machines in Bitcoin’s mining network, now in the thousands, compute an encryption function called a “hash” on a set of random numbers, and coins are awarded every ten minutes to whichever miner happens to compute a number below a certain threshold.

That lottery tightly controls how many Bitcoins are created. There are currently close to 6 million in existence. By 2014 there will be about twice that number. Bitcoin’s distributed software is set to slow production over time so that there will never be more than 21 million in circulation. “No banker can control it. No evil dictator tyrant can print zillions and destroy the value,” says Bruce Wagner, organizer of New York’s Bitcoin developer’s meet-up.

via Crypto Currency – Forbes.com.

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on the disappearing consultant

 

logo for Techmeme | 99designs.

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on the importance of a profit model

What Happens When An Unprofitable Company IPOs?.

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