SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Google’s Story That Google Reader Traffic Declined Is BS When You Put That Traffic Alongside Google+

Posted by Bob Warfield on March 15, 2013

It wasn’t hard to read between the lines–I’ve been calling Google’s decision to drop Google Reader a Microsoft-esque decision made to try to push customers to their other products, and especially to Google+.  Google’s story that it needed to be done because of declining traffic is BS when you look at the real numbers.  Buzz Feed took care of that for us very nicely:

enhanced-buzz-13120-1363274183-3

Not only was it not declining, it was actively growing, while Google+ stayed flat.  Cancelling projects like this is what happens when politically unpopular projects start to make the higher up’s projects look like failures.  It’s one of the many ways Big Companies manage to shoot themselves in the foot every day.  It isn’t a stretch to believe that somebody got concerned there might even be a resurgence in Google Reader’s popularity underway.

Posted in business | 7 Comments »

6 Ways The Pundits Are Dazed and Confused About Google Reader and RSS

Posted by Bob Warfield on March 14, 2013

mainstream-mediaOne of the you-betcha-surefire Pundit strategies is that when something is getting a lot of heat, like the current flap over Google dropping Google Reader, you can get a lot of attention by disagreeing with the crowd.  You want to do so in the most colorful possible way, in fact.  It’s a common form of link baiting and mild trollership.  So long as all that’s happening is they’re family the flames of emotion for their own benefit and to gain attention, I couldn’t care less.  But, along with this behavior, comes the risk that someone will actually take some of what’s said seriously and be confused about it.  That’s to be avoided.  Hence my list of 6 ways the Pundits are confused about Google Reader and RSS:

1.  Just use Twitter

There are so many problems with Twitter as a replacement for Google Reader that I’ll only list a few of the most important:

-  You can only search 140 characters when looking for meaning, whereas with RSS/Reader you get to search the title and the full contents of a blog post.

-  The signal to noise ration on Twitter is terrible.  Save one silly article where the ZDNet writer said he had failed to organize his RSS feeds but had very carefully tended to his Twitter followings, this is not something many disagree with.  Twitter is overrun by chittering twirping bots.

-  What signal that does exist on Twitter is largely coming from people who use RSS Readers to curate what they pass along.

-  Twitter is the poster child of a company that frequently upsets and destroys its ecosystem in its own self-interest.  If you think that is bad while it’s been private, just wait until it is under the publicly traded spotlight to show growth to sustain its ridiculous multiples.  Why would you trust that whatever you value about Twitter has any permanence at all?  Particularly after watching the Google Reader-you-are-products-not-customers drama unfold?  As the saying goes, fool me once…

-  Twitter has all the problems of the River of News Metaphor, which is next up.

2.  The River of News is a Better Metaphor

I can’t avoid addressing the “River of News” metaphor when RSS inventor Dave Winer says that’s the better mousetrap and when so many who prefer Twitter think they want the River of News.

My problem with the River of News is not that it isn’t a good metaphor.  Rather it’s that Google Reader could function just fine as a River of News (you don’t have to care about unread vs read or put anything in folders, just reader the latest arrivals as you wish) and that the River of News doesn’t solve the problem Google Reader is ideally suited for.  More on that problem below, but right here, let’s focus on what problem the River of News does solve.  It’s the problem of Finding Something Current of Interest Right Now.  That’s a useful problem to solve for many people.  If you just want to be on top of the latest industry gossip so you don’t feel silly at lunch, it works.  If you just need to kill a little time and want to learn something new, it works.  However, if you actually want to solve the Real Problem that Google Reader was the best at solving, the River of News is useless.  The River of News is what True Google Reader Users spent their time trying to get past.  Let me illustrate.

I used Google Reader in some specific ways precisely because I was trying to avoid the River of News.  The River views that the most important dimension is arrival time.  The more recent, the better.  Consequently, I used Reader’s folders to group noisy sites under a category I called “Bulk Feeds”.  These were the general purpose news sources like Techmeme, ZDNet, GigaOm, or (back when I cared) TechCrunch.  Every single day I would start the morning by marking all read except today’s entries in the Bulk Feeds folder.  I wish I could’ve automated it by saying, in essence, “For this folder I only care about what came out in the last 24 hours and you can delete the rest.”

I had a second group of folders I called “A-List”.  This was a group of very very good bloggers who were more likely to be worth wading through more articles than the Bulk Feeds, but who were still extremely general in terms of their content.  Seth Godin would be a good example.  It would’ve been nice to be able to mark these as read if older than a week.

Every thing else went into a folder by subject, because these were blogs that were highly focused on deep areas (outbound marketing, seo, UX design, etc.) and that wrote content that was essentially Evergreen.  Any blogger or SEO marketer knows what Evergreen content is–it’s content that is not perishable and that you’ll get value out of for years.  This is content that I explicitly do not want to see lost in a River of News, that I do want to be able to read through over time so I will not mark it as read without at least skimming it.  This is the content Google Reader is really the best tool for curating, and it is the content that River of News substitutes are the absolute worst at helping me acquire, manage, and consume.

3.  Google Reader Was Preventing Innovation

Mark Masterson gets my award for silliest and most confused outlook on Google Reader.   His long and bizarre rant against it seems to boil down to it being bad for any software to be around for too long, apparently because it stifles innovation.  Apparently it is some sort of impediment to evolution.  Baloney.  There’s been plenty of misguided evolution going on and none of it has solved the problems Google Reader solves.  There are cases where there isn’t any particular benefit to be gained by trying to evolve further solutions to a particular problem.  When that happens, it’s a good thing if the solution has commanding market share and is allowed to stand while others see clearly the ecological niche related to that market is now filled.  Aside from a desire to keep enough competition to avoid monopolistic price gouging, there’s no real evolution needed.

One of the biggest risks is that in their effort to fill the gaping Google Reader void with something new, New, NEW, we will lose sight of what Google Reader did well.  By deciding to fix its shortcomings, we’ll get a magazine like Flipboard, a way to read something later like Instapaper, or an ambient noise generator like Twitter.  These are not innovations on Reader, they’re different eco-niches entirely.

4.  RSS is Dying Because It’s Not Social Enough

We’ve all met people that approach “friends” in one of two ways.  There are those people that form extremely deep and long-lasting friendships.  Then there are those who will refer to anyone they’ve met as a friend.  Certainly there are possibilities between these extremes, but on the whole, people tend to fall more at one end or the other than not.  Those people that argue RSS is not social enough are from the “If I’ve met you, you’re my friend” extreme.  They have a zillion follows on Twitter, a zillion friends on Facebook, and a zillion more connections on LinkedIn.  Or, perhaps their bipolarity is a function of type of relationship, with a zillion business-related connections and relatively few personal connections.

But here is the thing–RSS is for those people that want to form extremely deep and long-lasting connections.  That’s what the RSS experience is all about–I don’t want to miss anything you’re saying so I will subscribe to you in my Reader, and once there, you’ll probably stay there for quite some time.  The River of News crowd thinks that because they’ve exchanged the occasional Tweet with someone they don’t really know and may never Tweet with again, that’s being more Social.  No, not at all–they’re different kinds of Social and we’re losing essentially half of the Social spectrum when we walk away from RSS.

That same ZDNet writer who never organized his RSS feeds but carefully curated his Twitter and then complained RSS was too noisy claimed:

SS readers don’t exactly lend themselves to conversations either — the sorts of conversations that happen quite naturally on social media (including social bookmarking/linking sites like Reddit).

Yet, he has 33 comments on that post as I write this, and I’m sure there’ll be many more before people quit commenting on it.  Many of the comments are more thoughtful than 140 characters can support.  Ironically, so far this year he has had exactly one post (on why the cost of the 128 GB iPad doesn’t matter) that had more comments.  I’m not going to bother counting how many of his Tweets had more conversation as the point is made that he couldn’t hope for a more social medium than RSS and blog comments.  There isn’t one that exists.  I doubt even Fred Wilson could claim otherwise given how his blog comment ecosystem works even though he is an investor in Twitter.

5.  Since Google Reader Was Never Profitable, It’s Best To Shut It Down

This is a popular refrain:

Google is a business it has to make money and it has every right to shut Google Reader down because it wasn’t making money and you have no right to complain about it because it was free.

Bollocks.  If Google was Walmart choosing not to carry some product or other that I used to be able to buy there cheaply, that’d be one thing.  But here is the difference:  Google is igniting real negative sentiment towards the Google Empire as a result of this decision.  They’re making a mockery of their business motto of, “Do no evil.”  In fact, I would argue that very root of the Evil they claim to want to avoid stems from the idea that most of the people who use their software (I am carefully not calling that software “products”) are not their customers.  Google’s Customers pay for advertising and give them money.  Rather, those of us who use their software are in fact the real “products” Google has to sell.  When you look at it that way, any massive sentiment issue among the “products” is a defect that is ultimately bad for the business.  You can only mistreat the “products” for so long before they revolt.  Unfortunately, these “products” are fickle and don’t have to stay with Google.  They can be “products” for lots of others.

Closely related is Google’s Valuation.  It is unnaturally high for a reason–because people believe in them.  Actions like sunsetting Google Reader damage that belief right at its core.  This is a grass roots problem that ultimately leaves only the role of commoditizer open to Google, and this is not good for their long term valuation prospects.

6.  RSS and Reader Are In Decline and the Average Consumer Never Used It, So Why Bother?

Let’s leave aside for the moment that some of the folks who worked with it say this has little to do with decline and everything to do with trying to prop up Google+.  While I find that notion entirely plausible and painfully Microsoft-like in its execution, it’s worth musing about the “decline” of RSS.  It’s a bit like saying that since so many Prius’s have been sold Porsche’s are in decline.  Porsche’s were never meant to take the place of the Prius.  It is not unusual for the power tool to come along first followed by the tool the mere mortals can use, but that does not in any way diminish the value of the power tools.  Look, we started with HTML and people had to know it and deal with it to have a web presence.  Then we got some better tools such as blogs.  Eventually we made it all the way to things like Twitter and Facebook, where anyone can have a web presence very easily with absolutely no need of technical knowledge or even the creative ability to write more than 140 characters or so of text.  That’s great, but it in no way means that since we can create 140 character messages easily we’ve no need of static HTML pages or blogs.  It’s fuzzy thinking.

I have no problem believing the number of people who engage in use of the power tool may have declined a bit, but as I mentioned on the Twitter note above, these other tools remain vitally dependent on the power tools users who are curating content.  It’s less a decline and more of a saturation.  This is the same fuzzy thinking that leads us to declare that since people are buying smartphones and tablets like there is no tomorrow the desktop PC must be dead.

The idea that the only thing that matters is what appeals to the lowest common denominator is what’s wrong with the news today in general.  It’s why there’s a more enlightened crowd out there that very much wants to seek the Long Tail, needs Google Reader to do it, and couldn’t care less about USA Today, Fox News, Huffington Post, or Techcrunch.

What Google Reader Really Was:  Super High Octane Page Rank

Laura Hazard Owen’s, “Google Reader, Please Don’t Go — I Need You To Do My Job” is one of the best takes on what Google Reader really does I have seen.  She makes her case well:

-  Twitter is no substitute for RSS:  The best thing about Google Reader, from my point of view, is that it allows me to scan a lot of information quickly, with the assurance that I’m not missing anything.  Exactly what I’m saying about Twitter and the River of News metaphor.

-  Neither is Flipboard:  Services like Flipboard are great if you want to see the most popular stories on a given topic. But as someone who really geeks out digital book publishing, I don’t just want to see the stories that an aggregator recommends for me because they’ve reached a critical mass.  Amen, sister!  I want to lever myself as far out onto the Long Tail as possible because that’s where the real action is.  Everything else is processed and homogenized for mass consumption.

Let me go beyond what Laura has to say to cut through to essence of what I think Reader is.  Laura talks about it being for someone who wants to, “…keep track of what’s going on at the roots of my beat” or to “…really geek out” on some subject or other.  It solves a very deep Search problem by facilitating a connection between the consumers of the information who want to get it in as dense and pure a form as possible, uncut on the street with the baby laxative the various aggregators use to define what will be popular.  It is information curation in its purest form.  If we once manage to find the true experts in the subjects we thrive on, the very wellsprings from which the best ideas flow, how could we not want to establish a permanent pipeline into those cognitive reservoirs?  How else to do so than by use of a tool like Google Reader.  This is the Super High Octane driven by true Human Intelligence alternative to Page Rank.  It’s Quora done more deeply than a single question at a time.  It’s more deeply Social than anything seen since for those who genuinely want to be a part of a select community of Thinkers.  It is Ernest Hemingway and all of the others in Paris.  It’s plugging directly into particular cyber-cognitive neighborhoods the way only Gibson and Stephenson could imagine before it came along.  And Google wants to burn it down.

Try asking Ernest Hemingway to communicate with his peers 140 characters at a time while anyone who wants can crash the party and conversation.  Writing is a lonely business, but it doesn’t have to be that lonely.

Posted in user interface, Web 2.0 | 5 Comments »

Google, If You Think I’ll Move From Reader to Another Google Product, Drop Dead

Posted by Bob Warfield on March 14, 2013

rssJust got the news that Google Reader will be turned off July 1.  Realistically, I should’ve moved after the first time they brain-damaged it and I railed about it, but I stupidly stuck to it.  Now I’m sorry.

I’m not the only one, Om Malik says it is his second most used Google application after Gmail.  Ditto for me.  I’d like to see Google publish the real figures on the supposed decline in Reader usage.  I bet it was still huge.  This is just a typical big company move to push their customers, I mean products, into toeing the line they’ve drawn.  They want us to go to Google+ or some darned thing where they can sell more ads or beat some competitor into submission.

What will be next, Google, turning off GMail?  Or are you too intent on bashing Microsoft over the head with it?

I’m tired of companies treating me like the product instead of the customer when they’re ad-driven.  It’s a sham and a bait-and-switch.  It is the root of all the evil Google claims they will never do, and keep doing with ever increasing frequency.

If you think I’ll move from Reader to some other Google product, drop dead.  It ain’t gonna happen.  From here on out, I will look to minimize my involvement with anything new from Google.  In fact, I’m shutting down my PPC advertising as soon as I am done here.  At least where that is concerned, I am a customer, and I can vote with my pocket book.  Learn how to save your data out of reader here.

This is bad news indeed for bloggers all over the world, who should find their own ways of letting Google know they’re not pleased.

A Modest Proposal

What Google should have done, is ceded Reader, source code and all, to a company that actually values Blogs and Bloggers.  How about the WordPress folks?  They should take it up, or failing that, create a WordPress theme that emulates reader and make it available for free via WordPress.com.  Matt Mullenweg, are you listening?

Failing WordPress, either Microsoft or Yahoo should dive onto this just for the customer goodwill.  I bet both companies would get back folks who haven’t been enthusiastic about them for years if they could field a good replacement within 3 years.

Postscript

A quick perusal of the comments in these various blog (blog == duh!) posts about Google Reader tells me there are lots of unhappy products, um customers, out there when it comes to this latest Google decree:

GigaOm

Techcrunch

Gizmodo

LifeHacker

And, here is a list of potential alternatives:

OldReader:  Very slow as I write this.

NewsBlur:  Down as I write this.

Rolio:  Awesomely slow as I write this.

GoodNoows:  Performance not too bad.

There are likely more, but I am too disgusted to root around for them right now.  Notice I’ve commented on site status, which has been poor this afternoon, no doubt due to the tiny few who still used Reader (yeah, right, there are zillions of us) looking for alternatives.  I haven’t looked into any of them yet, so I have no favorites to recommend.  These sites are all about to get a huge windfall of users as they choose alternatives, but it remains to be seen which ones can really take up the exodus.

There’s also things like Feedly, NetVibes and Flipboard, but I don’t want that ilk.  I don’t want a magazine.  I subscribe to nearly 200 blogs and need a power tool that lets me triage minimalist summary lists the way Reader did so I can get right to the good stuff.  I also don’t need an iOS or other mobile app.  While I often access Reader via my iPad, I also want desktop access without the nuisance of an app.

Posted in strategy | 9 Comments »

Check on Your SaaS Company’s Hosting Provider, Avoid Firehost

Posted by Bob Warfield on February 25, 2013

PagelyDown

My CNCCookbook blog is experiencing it’s second outage so far this month.  That’s a cause for visitor unhappiness and potentially lost business.  I use Page.ly, because I believe in SaaS services.  CNCCookbook is bootstrapped, and I try not to spend any of my time at all doing something that I can easily have done for me by a SaaS provider, like hosting a WordPress blog.  Page.ly has been pretty good in most respects, though far from perfect in terms of outages.  Frankly, there have been too many outages and having two in one month is starting to be a bit much.  Their story is that their hosting provider, FireHost, has created both of these problems.

It’s even affected the Page.ly blog, as it did the last outage too.  Ironically, I wouldn’t be posting this blog except that Page.ly’s blog went to the same screen I’m showing here when I attempted to comment that maybe it was time they thought about Firehost alternatives.

Whatever’s going on at Firehost, and however much it saves Page.ly to use Firehost instead of some more reliable service, it’s not worth it guys.  It’s making you look bad, and through extension, that makes my business using your service look bad.  The good news is if it continues, it is very straightforward to migrate to Page.ly’s competitors.  I also have experience with WPEngine from a prior company, and found them to be more performant and a nicer service, but quite a bit more expensive.  Perhaps some of that expense is going to a better hoster for their service.  At CNCCookbook, we use Amazon for our own services and I can’t remember the last time we had an outage.  Maybe once have we had one, and it involved the simple expedient of rebooting our EC2 instance.

In the end, if I do move the CNCCookbook blog, I will be checking who the new provider uses as their hoster.  If it’s FireHost, there’s not much point in moving.  Some service should start aggregating up time data on the hosting services.  It would be good to know who your SaaS provider uses–unless they’re huge they probably don’t have their own servers–and how reliable that provider has been over time.  While it may not seem like it, it will be in every SaaS company’s best interests to cooperate with such data collection simply because it shines a light on the hosting providers that will require them to rise to the next level of reliability.  As it stands, they’re a step removed and much harder to track.

Sorry Page.ly and Firehost–no links for you.  Not happy today.

Posted in business, cloud | 3 Comments »

Charging for Your Product is About 2000 Times More Effective than Relying on Ad Revenue

Posted by Bob Warfield on February 22, 2013

BootstrapsI was reading Gabriel Weinberg’s piece on the depressing math behind consumer-facing apps.  He’s talking about conversion rates for folks to actually use such apps and I got to thinking about the additional conversion rate of an ad-based revenue model since he refers to the Facebooks and Twitters of the world.  Just for grins, I put together a comparison between the numbers Gabriel uses and the numbers from my bootstrapped company, CNCCookbook.  The difference is stark:

Ad-Based Revenue Model CNCCookbook Selling a B2B and B2C Product
Conversion from impression to user 5% Conversion to Trial from Visitor 0.50%
Add clickthrough rate 0.10% Trial Purchase Rate 13%
Clickthrough Revenue  $      1.00 Avg Order Size  $ 152.03
Value of an impression  $ 0.00005  $      0.10 =     1,976.35 times better

Let’s walk through it.

Both sites have visitors who convert to something more.  In the case of the Ad-Revenue model, presumably it is a person who creates an account on a Facebook or Twitter-like site, thereby becoming a user.  Gabe says that conversion rate for a really strong property might be 5%.  It can be much lower, like 1 to 3%.  I went with the optimistic 5%–the model is already too hard to contemplate 1%.  In the case of CNCCookbook, the conversion is from visitor to Trial user for the software.  We have a 30 day free trial on all our products.

From becoming a User or Trial User, the next conversion rate is monetization.  For the Ad-Revenue model, I did a quick search for clickthrough rates on display advertising and came up with 0.1%.  Sure, you might get your Users to click on more than one ad over time, but let’s just keep these numbers simple.  They’re not going to click on 2000 ads to even the score, after all.  For CNCCookbook, we have a very high conversion rate from trials–about 13%.  I view that as a commentary on the high quality of our software–people like it if they try it.  I understand conversions in the 5% are more common, so you may be forgiven for deciding the ad revenue model is only 1000 times less effective than charging for a product.

Okay, given those conversion rates, we take the average revenue per transaction and multiply all that on through to find the value of an impression.  What is it worth to you to bring another visitor to your site?

In this analysis at least, it’s pretty easy to see why bootstrappers need to be charging for their products and not relying on ad revenue.  Unless you just happen to have an amazingly viral product, it’s just too hard.  You have to rack up way too much traffic to get to interesting revenue levels.

Or, to put it like 37Signals:  Charge for your products, Dummy!

Posted in bootstrapping, business, strategy, venture | 2 Comments »

How Many Software Companies Monitor Their Software as Well as Tesla Monitors its Cars?

Posted by Bob Warfield on February 14, 2013

The unfolding story of how the New York Times’ negative review of the Tesla Model S may have actually been faked is a cautionary tale for software vendors.  Basically, there is enough instrumentation and feedback built into the Tesla S that Elon Musk was able to “shred” the review, as Dan Frommer writes.  The graphical plot of exactly what was happening with annotations is particularly damning:

NY Times Tesla Speed Chart

It’ll be fascinating to see how the NYT responds.  Hard to imagine how they do anything but investigate Broder and ultimately move him along elsewhere.  To do much else would imply very little journalistic integrity.

My question for you is that since you’re reading this blog and are likely somehow involved in high tech hardware or software at some level, how does your product compare in terms of how well it can monitor what your users are doing with your product?

I’m fascinated with the idea of closing the feedback loop for the good of customers.  Yes, it’s great Musk can catch the NYT in a bogus review, and perhaps you will catch a reviewer too, but the potential for improving your customer’s experience is of much greater value to your product.  This may seem like a Big-Company-Only idea, but I’m pursuing it with a vengeance for my SaaS bootstrap company (CNCCookbook) because I need precise feedback that pinpoints where I can do the most good for my users with the scarce resources I have available.  I can tell you from experience that the tools are available and straightforward.  You can have the data for very little effort invested.

The next thing I am after is to automate responses to that data.  I’ve been reading the blog of a company called Totango with some interest.  They essentially want to provide SaaS automation for a Customer Success team.  Various folks have written about the importance of Customer Success and I’m also a big believer.  My thoughts at this point are to start out relatively simple.  I want to understand the early lifecycle of my products and be able to trigger automated actions based on that cycle.  For example:

Step 1:  Installation

Monitor the first time the customer has successfully logged into the product.  Offer increasing amounts of help via emails once a day until they achieve this milestone.  The emails can start with self-service help resourcs of various kinds and eventually escalate to offering a call or help webinar.  The goal is to get the customer properly installed.

Step 2:  Configuration

This seems like part of installing, but in fact there is significant post installation configuration needed for CNC Manufacturing software.  Same sort of thing: provide daily emails with increasing levels of help until the system determines that the user has properly configured the system.  Also, this is an opportunity to collect information.  We provide canned configuration for the most common cases and finding out what the next tranche of cases to target should be is very helpful.

Step 3:  The Path to Power Usage

It’d be great if everyone who signed up for our 30 day free trial actually got to see and understand all of the features that set our product apart.  I’ve seen some other products like Dropbox (Full disclosure: they give me another 250MB of storage if you use that link and then sign up. If you’d rather I didn’t get the extra storage, use this link instead. If you sign up, they’ll give you a link where you can get 250MB free too.) walk customers through a usage maturity exercise.  They’ve somewhat gamified it by giving out some of their “currency” in the form of extra storage if you complete the tasks.  My goals here would be to get everyone to see as many of our unique functions as possible during the 30 day trial.

Step 4:  The Holy Grail: Referrals

If all this goes well, the customer gets through the Trial, understands the unique capabilities of our products, and likes the product well enough to buy it, then the final stage in this incarnation is to ask them to refer others they know who might like the product.

That’s a pretty simple roadmap for how to create some closed-loop feedback of telemetry and drip email that improves your customer’s experience.  So I’ll ask again:

Is your company setup to monitor your users as successfully as Tesla monitors its drivers?  Why not?  I’ve used a lot of software where it is pretty clear they’re not monitoring much at all.  I’ve even talked to some of them to encourage change, and they seem receptive.

If you have a story about what sort of work along these lines you’re doing, please share it in the comments below.  I’m very curious.  I think we have the potential to personalize the experience for our customers like never before.

Posted in business, cloud, customer service, software development, strategy, user interface | 6 Comments »

Just Got My Vanity Plates from LinkedIn

Posted by Bob Warfield on February 12, 2013

I recently got a notice from LinkedIn stating that my profile was in the top 1% out of 200 million in terms of how many people had viewed it.  So, they sent me my vanity shot:

OnePctLinkedIn

It’s a nice letter.  I admit I puzzled over who could be spending so much time checking out my profile–seems like a lot more than 1 in 100 people would be ahead of me in terms of attention and name recognition out of the 200 million on LinkedIn.  I would count most of my LinkedIn contacts for starters.

However, it didn’t take much thought to conclude this was probably due to my bootstrapped company CNCCookbook.  We get about 1.5 million visits a year to the web site, making it one of the top CNC sites and almost certainly the most popular CNC blog.

In other words, my marketing is working.  That’s a good thing in a bootstrapped SaaS company.  What a great Age we live in when a SaaS company can be created by just one man and reach so many.

Posted in bootstrapping, business | Leave a Comment »

Big Data is a Small Market Compared to Suburban Data

Posted by Bob Warfield on February 2, 2013

BurbsBig Data is all the rage, and seem to be one of the prime targets for new entrepreneurial ventures since VC-dom started to move from Consumer Internet to Enterprise recently.  Yet, I remain skeptical about Big Data for a variety of reasons.  As I’ve noted before, it seems to be a premature optimization for most companies.  That post angered the Digerati who are quite taken with their NoSQL shiny objects, but there have been others since who reach much the same conclusion.  The truth is, Moore’s Law scales faster than most organizations can scale their creation of data.  Yes, there are some few out of millions of companies that are large enough to really need Big Data and yes, it is so fashionable right now that many who don’t need it will be talking about it and using it just so they can be part of the new new thing.  But they’re risking the problems many have had when they adopt the new new thing for fashion rather than because it solves real problems they have.

This post is not really about Big Data, other than to point out that I think it is a relatively small market in the end.  It’ll go the way of Object Oriented Databases by launching some helpful new ideas, the best of which will be adopted by the entrenched vendors before the OODB companies can reach interesting scales.  So it will be with Hadoop, NoSQL, and the rest of the Big Data Mafia.  For those who want to get a head start on the next wave, and on a wave that is destined to be much more horizontal, much larger, and of much greater appeal, I offer the notion of Suburban Data.

While I shudder at the thought of any new buzzwords, Suburban Data is what I’ve come up with when thinking about the problem of massively parallel architectures that are so loosely coupled (or perhaps not coupled at all) that they don’t need to deal with many of the hard consistency problems of Big Data.  They don’t care because what they are is architectures optimized to create a Suburb of very loosely coordinated and relatively small collections of data.  Think of Big Data’s problems as being those of the inner city where there is tremendous congestion, real estate is extremely expensive, and it makes sense to build up, not out.  Think Manhattan.  It’s very sexy and a wonderful place to visit, but a lot of us wouldn’t want to live there.  Suburban Data, on the other hand, is all about the suburbs.  Instead of building giant apartment buildings where everyone is in very close proximity, Suburban Data is about maximizing the potential of detached single family dwellings.  It’s decentralized and there is no need for excruciatingly difficult parallel algorithms to ration scarce services and enforce consistency across terabytes.

Let’s consider a few Real World application examples.

WordPress.com is a great place to start.  It consists of many instances of WordPress blogs.  Anyone who likes can get one for free.  I have several, including this Smoothspan Blog.  Most of the functionality offered by wp.com does not have to coordinate between individual blogs.  Rather, it’s all about administering a very large number of blogs that individually have very modest requirements on the power of the underlying architecture.  Yes, there are some features that are coordinated, but the vast majority of functionality, and the functionality I tend to use, is not.  If you can see the WordPress.com example, web site hosting services are another obvious example.  They just want to give out instances as cheaply as possible.  Every blog or website is its own single family home.

There are a lot of examples along these lines in the Internet world.  Any offering where the need to communicate and coordinate between different tenants is minimized is a good candidate.  Another huge area of opportunity for Suburban Data are SaaS companies of all kinds.  Unless a SaaS company is exclusively focused on extremely large customers, the requirements of an average SaaS instance in the multi-tenant architecture are modest.  What customers want is precisely the detached single family dwelling, at least that’s what they want from a User Experience perspective.  Given that SaaS is the new way of the world, and even a solo bootstrapper can create a successful SaaS offering, this is truly a huge market.  The potential here is staggering, because this is the commodity market.

Look at the major paradigm shifts that have come before and most have amounted to a very similar (metaphorically) transition.  We went from huge centralized mainframes to mini-computers.  We went from mini-computers to PC’s.  Many argue we’re in the midst of going from PC’s to Mobile.  Suburban Data is all about how to create architectures that are optimal for creating Suburbs of users.

What might such architectures look like?

First, I think it is safe to say that while existing technologies such as virtualization and the increasing number of server hardware architectures being optimized for data center use (Facebook and Google have proprietary hardware architectures for their servers) are a start, there is a lot more that’s possible and the job has hardly begun.  To be the next Oracle in the space needs a completely clean sheet design from top to bottom.  I’m not going to map the architecture out in great detail because its early days and frankly I don’t know all the details.  But, let’s Blue Sky a bit.

Imagine an architecture that puts at least 128 x86 compatible (we need a commodity instruction set for our Suburbs) cores along with all the RAM and Flash Disc storage they need onto the equivalent of a memory stick for today’s desktop PC’s.  Because power and cooling are two of the biggest challenges in modern data centers, the Core Stick will use the most miserly architectures possible–we want a lot of cores with reasonable but no extravagant clock speeds.  Think per-core power consumption suitable for Mobile Devices more than desktops.  For software, let’s imagine these cores run an OS Kernel that’s built around virtualization and the needs of Suburban Data from the ground up.  Further, there is a service layer running on top of the OS that’s also optimized for the Suburban Data world but has the basics all ready to go:  Apache Web Server and MySQL.  In short, you have 128 Amazon EC2 instances potent enough to run 90% of the web sites on the Internet.  Now let’s create backplanes that fit a typical 19″ rack set up with all the right UPS and DC power capabilities the big data centers already know how to do well.  The name of the game will be Core Density.  We get 128 on a memory stick, and let’s say 128 sticks in a 1U rack mount, so we can support 16K web instances in one of those rack mounts.

There will many valuable problems to solve with such architectures, and hence many opportunities for new players to make money.  Consider what has to be done to reinvent hierarchical storage manage for such architectures.  We’ve got a Flash local disc with each core, but it is probably relatively small.  Hence we need access to storage on a hierarchical basis so we can consume as much as we want and it seamlessly works.  Or, consider communicating with and managing the cores.  The only connections to the Core Stick should be very high speed Ethernet and power.  Perhaps we’ll want some out of band control signals for security’s sake as well.  Want to talk to one of these little gems, just fire up the browser and connect to its IP address.  BTW, we probably want full software net fabric capabilities on the stick.

It’ll take quite a while to design, build, and mature such architectures.  That’s fine, it’ll give us several more Moore cycles in which to cement the inevitability of these architectures.

You see what I mean when I say this is a whole new ballgame and a much bigger market than Big Data?  It goes much deeper and will wind up being the fabric of the Internet and Cloud of tomorrow.

Posted in business, cloud, data center, enterprise software, multicore, platforms, saas, service | 2 Comments »

Career Advice: When They Replace the CEO At Your Company, It’s Time To Move On

Posted by Bob Warfield on January 18, 2013

steve-jobs_john_sculley

A word of warning: VC’s and CEO’s may hate this post, though more the former than the latter unless you’re the New CEO replacing the Old CEO.  I must also say that the Valley has gotten better in recent years as it has realized that replacing a CEO is no small thing.  Many now conceed that may be easier to train a good Founder to be a CEO than to get a CEO to understand what the Founder has hardwired into their DNA.  Nevertheless, replacing CEO’s is a very common thing in the Valley.  Young entrepreneurs have no idea how prepared their Board is to do so if they hit a rough spot.  I had a VC tell me one time, “Replacing people is what we do, that’s really how we add value.”  What the Young Entrepreneur may not know is that perhaps their Board made the decision to replace the Entrepreneur as long ago as the very first time they gave them money.  I guarantee any smart investor will have thought about it and decided how far they think the Founding CEO can take the company.  A clock may be ticking that the Founder doesn’t even know exists.

I will leave aside the discussion of what the replaced CEO/Founder ought to do.  They’re going to have to figure out how to make peace with the new arrangement and whether to stick with their company.  Ideally, everybody knew it was coming and the Founder didn’t even want to be the CEO.  Equally as ideally perhaps the New CEO and the Board will continue to see some value in keeping the Founder around and that value will be something the Founder is prepared to deliver.  In that case, maybe there is hope and you should disregard this post.  These are matters for the Founder to consider with regards to their career, but if you’re not a Founder, read on because your situation is different.  This is not about whether it’s possible to hire a better CEO or whether there aren’t companies that have done very well hiring new CEO’s.  It’s not about the fate of companies at all, it is about the fate of your personal career.  This is about some math and some personal experience that both speak loudly to my own calculations about career.

First thing is, I have a fair bit of experience with this process.  Out of 7 gigs so far, 3 have involved a CEO replacement and at the most recent one, I was the CEO that replaced the incumbent.  Based on the experiences of the first two I had decided that if the CEO was replaced in future gigs, I was moving on.  This is what I told the Board the first time they came to me and wanted to replace the CEO at the third gig.  What I hadn’t counted on was that they would ask me to step up to the position at a later date.  Somehow, when that happened, I forgot my old plan and launched into the CEO job with gusto.  We showed immediate strong growth and got the customer to where it should’ve been in terms of financial metrics for a SaaS company of our size.  It didn’t matter in the end and the company failed because it couldn’t raise a round (which is the cause of death for most startups).  I should have stuck with my original plan and moved on when the CEO was replaced.

I can walk you through the whole story and point to ample extenuating circumstances for why the company couldn’t raise a round–we needed to raise that round shortly after the 2008 Dinosaur-killing Sequoia memo went out, one of our two VC’s wouldn’t participate because they had investments in competing companies, yada, yada.  It’s all bullshit because these were symptoms and not the disease.  When Boards replace CEO’s they are fixing a Big Problem.  Typically it is a very big problem, although it may not be the problem you think it is.  You’re there, in the trenches, focused on winning at your startup.  Your Board is jaded, they have a lot of other investments, and they’re focused on minimizing their pain while they let their winners run with as much rope as possible.  They are far more subject to Deal Fatigue than you are, and they’ve heard so many presentations filled with facts and figures that they’re much more willing to go with their Gut.  They have the luxury of going from your Board Meeting, which is depressing as heck, to one at another portfolio company that is leaping over tall buildings in a single bound.  Only the very best Board Members can be objective and keep all these experiences separate.  Put your hand in cold water and then into lukewarm water and the lukewarm feels scalding hot.

That Big Problem will be described in rational terms like, “This company has never hit a target yet on Sales.”  But, the reality may simply be that not only are they tired of dealing with missed targets (which may have been overly optimistic, missed by just a little bit, or impacted by Outside Events out of the Company’s control), but they’ve also lost their optimism, and they don’t trust the Old CEO.  That’s a very dangerous Big Problem to try to solve because Deal Fatigue magnifies the scale of every problem.  You see, the VC’s never had the degree of Hope and Fanaticism that I hope you came into the deal with.  They can’t, they’ve seen too many fail and they’re totally bought into the Portfolio Effect.  They don’t have to fight every battle tooth and nail, they just have to know where to double down and where to cut their losses.  You can’t take it personally, it’s their job and their business and they are good at it.

So if the CEO is being replaced, your business is probably facing the very biggest problem the Board can imagine plus a lot of subjective negative momentum that only the Board feels.  It’s both a numbers problem and a relationship problem.  Naturally there must be a relationship problem, because events are leading to a divorce.  Sure, maybe it’s all proactive and there’s no problem beyond a little growing pain.  Right.  And maybe that horse over there is really a unicorn that temporarily misplaced his horn.  There are two cases to replace the CEO:

1.  The incumbent was never going to take the whole trip and knows it and everyone has found a happy upgrade.  This is a Good CEO Transition.

- or -

2. That Big Problem is staring the Board in the face (numbers) and they don’t believe the incumbent can get through it (relationship).  This is a Bad CEO Transition.

This is the time to take a good hard look at the Old CEO and ask yourself whether they were the sort that never planned to finish the job and they welcome an incumbent.  You can tell if you’re any kind of judge of character at all.  The signs will have been there all along.  The Old CEO will be too young and inexperienced.  They will lack ultimate leadership potential and CEO gravitas.  The new guy, meanwhile, will be much more experienced and will carry much more gravitas.  They’ll be exceedingly smooth and confident.  There will be at least an initial sense that the old and new CEO’s like each other.  Those are some of the signs of a good CEO transition.

In a bad transition, the new guy may be a little more experienced at being a CEO or they may be the same or less CEO experience.  They often have a totally different background, “Hey, all we need to do is replace this Engineer with a Sales Guy and we are Golden.”  They often have a track record that has little to do with Startups and everything to do with having been a lesser executive at a much bigger company.  It’s the first CEO gig for an SVP of Sales, for example.  When they’re together, which will be rare, the Old and New CEOs don’t talk to each other much and don’t make much eye contact.  The Old CEO is either completely absent or remarkably quiet compared to his old self.  He’ll have nothing to say about his plans going forward.  “I just want to take some time off to relax with my family and decide what I’ll do next.”  Lastly, if the New CEO has some kind of amazing comp package, that’s a sign that an otherwise talented exec is being asked to step in and do what the Board views as Mucking out the Stalls.  Those are some of the signs of a bad CEO transition.

If your company has had a tough time making its numbers, if it has been pivoting, if there is unusual pressure for progress, if you’ve either just raised or are about to raise a round, and you see the Bad CEO Transition Signs, get your resume in order.

Why move on if you’re dealing with a Bad CEO Transition?

First, let me direct you to Jason Lemkin’s missive about what the dilutive effects of a new CEO will be.  What he has to say is absolutely true and I’ve seen it from both sides of the table (as the New CEO and as an exec greeting the New CEO).  Virtually everyone except the New CEO and VC’s will be taking a significant equity haircut.  It’s got to come from somewhere and the New CEO is the savior while the Board doesn’t consider itself part of the problem.

Second, consider what happens after the New CEO is hired.  For starters, you know something ugly is out there in the Board’s purview, whether or not you’ve been told what’s going on.  If you don’t already know, nobody is going to let you in on the secret just because there is a new CEO–quite the contrary.  Publicly, there are no Bad CEO Transitions, there are only Good CEO’s brought in amicably for the continued maturation of the company.  Besides realizing there is a Big Problem, you also have to come to terms with the challenges New CEO faces in overcoming that problem.  No matter what anyone may think, CEO’s are punished way too much for failure and rewarded way too much for success.  In other words, New CEO is going to have to make a lot more changes because just changing the CEO doesn’t go very far to solving the Real Problem.  New CEO can’t do it alone.  They are going to need a lot more capital (hence the dilution Jason writes about) and talent.  Unless your problem is one of simple execution, New CEO also faces the problem of educating themselves enough on your company and space so they can begin to formulate a solution.  Once they arrive at a solution, it will nearly always require still more time to hire the right people to help facilitate that solution.

Translation:  There will be no progress on your Company’s Big Problem during the CEO’s first six months and still no progress for probably much longer.

In fact, there may be no measurable progress for more than a year, although a smart New CEO will find something to declare victory on within 6 months.  Meg Whitman wants five years to show much progress at behemoth HP.  The reason it’ll take much longer is that even after the CEO formulates a new plan (what they’re doing the first six months), they must then get all the rowers in the boat moving in that direction and doing so with enough force that it has some measurable impact.  During that time, at least another six months, all sorts of unpleasantness will surface.  Anyone in the organization with a political bone in their body will be trying to romance the New CEO either to advance their own personal position, get New CEO to embrace their agenda for how to make it all better, or often both.  All those battles Old CEO fought to get the troops aligned and moving in one direction are suddenly undone, and the Old Combatants will be back to thinking they were right in the first place and the fact that Old CEO lost his job just proves it.

There is a tiny bit of good news in that if New CEO has been around the block and is smart, he knows darned right well the politicians are out in force and he is taking notes.  When he has a good idea who the worst offenders are, he will replace them with his own Trusted Lieutenants.  That’s good news assuming the Trusted Lieutenants are less political and are genuinely stand-up people who will help the Company succeed.  New CEO will probably also replace whoever runs the part of the company perceived as being the biggest part of the Big Problem.  Of course determining the truth of that is also ripe for political discord.  Sales will argue the Product sucked or that Marketing never got them enough leads.  Marketing will argue Product didn’t listen to their Product Managers, didn’t build enough product, or that Sales didn’t follow up the leads they were given.  Product will argue there’s been Sales Execution problems or that Marketing never really understood their product and wasn’t able to present their beautiful baby in a good enough light.  Finance will skewer anyone that was off budget by even a little bit.  This will all slow down the ability of New CEO to figure out what is happening considerably.  The smart ones may just choose to ignore all the history, focus on the Big Problem, and just start implementing their idea of Best Practices in whatever parts of the organization are most likely to improve on the Big Problem.  This is scary to all concerned because the changes are not motivated by anything in the Company’s history–they’re motivated by New CEO’s history and experience, which is not yet well known or understood withing the Company.  That’s why it will seem like there is no rhyme or reason to the decisions being made–you won’t have the right background to understand them.

If you are unfortunate enough to be in one of the organizations affected by these changes, life will be tough.  Progress in your area will be delayed while this cycle of learning, renewal, and execution winds it way down through various org charts until it has gotten sufficiently far from the source of the pain (the Board is the source) and sufficient time has passed that we can’t afford to keep rearranging the Deck Chairs on every deck.  A lot of the changes will make no sense to you at all, and you may wake up one day to find yourself in a company that bears little resemblance to the one you were so committed to not very long ago.  Whatever your motivations–money, a chance to work on something really cool, belief in the dream, etc.–it may no longer be possible to pursue them.  At best, a lot of time will pass and you’ll look ahead and still wonder when things will get back to “normal”.

Does all of this really have to happen?

If you have a Bad CEO Transition, in other words, one to fix a Big Problem, then I’m afraid the answer is, “Yes, that’s pretty much how things play out.”  Whatever happens, it will take a lot longer than anyone hopes to fix things.  Often, things will not play out and the company will be in permanent decline.  None of the three CEO replacements I’ve participated in resulted in a company that was ultimately better off.  Two of the companies are dead (Borland was a $500M a year high flyer and it is still dead having fallen inexorably with Philippe Kahn’s departure), and one still has a chance to get there, but at least from a shareholder value perspective, their high point is a long time back.

What do you do in these cases?

If you are in the right position, likely an executive reporting to the CEO and someone who at least sits in the Board Meetings, you are in a position to see it coming.  Watch for what I call the Three Deadly Sins of a CEO:

1.  They’ve missed their numbers.

2.  The Board is not confident in their plan to fix #1.

3.  They are not taking coaching from the Board.

In every one of the Bad CEO Transitions I have witnessed, these three sins have been allowed to go on for too long.  That is a surefire way for a CEO to get themselves fired.  Make no mistake, every CEO will break all 3 deadly sins at some point.  Many will break 2 at a time.  Some will break all 3.  That latter group has a very limited time in which to show results before the Board will take action.  I would say 6 to 12 months depending on the level of Deal Fatigue the Board is fighting to maintain perspective against.  For startup CEO’s, Deal Fatigue is charged directly against Political Capital and when you run out of PC, you’re toast.  Unfortunately, Deal Fatigue carries on like any other debt, and even the New CEO inherits the Deal Fatigue which is charged against their PC from the outset.

If you are not in a position to judge the subtle nuances of the Three Deadly Sins of a CEO, you may have to wait until the deed is done and the Old CEO is out before you know what’s happening.  In either case, once you know what’s coming, it’s time to prepare your parachute because the plane is going to lose altitude quickly and may very well crash.  If you’re lucky, the Outside World can’t tell there is a Big Problem.  The Board and everyone else will try to put forward the face that it is all a logical progression.  Find your next position on the strength of whatever positive sentiment remains around the deal.  If you ultimately believe the deal will be a success, buy out your options as cheap insurance that you will still profit to a degree.

Perhaps the best way to look at it, if you can be so objective, is to consider whether you would take the job with the company as it stands with New CEO and knowing everything you know about it.  Forget the old Dream that taints your soul and judgement.  Do you want to work at a turnaround?  One way to do that is to assume you have to start vesting your options all over again with a 1 year cliff.  The dilution, confusion, delays, and added risk associated with New CEO are going to amount to the same result anyway.  If you’re like me, and you’ve seen how the movie ends a couple of times, you’ll regretfully move on to find something new and less tarnished.  Unless of course it’s you they’re asking to step up and be the CEO.  My advice if that happens is to only consider that job if you’re a corporate ladder climber at heart anyway.  If you’re an entrepreneur, you won’t be happy and there are easier ways to get to be a CEO with none of the downsides.

What happens if you stay?

There are two winning strategies in turnarounds–you either want to be the first to leave or the last.  The last to leave gets to reap any benefits of the turnaround and having been part of it, may be rewarded more.  But there is the certainty that at best, the Company will wind up back on whatever Dream Success Track you had imagined, but it will happen much much later than you’d expected.  Alternatively, you can go find a new opportunity that doesn’t have the Deal Fatigue and Political Shuffling needed before New CEO can be successful.  BTW, make sure your new opportunity’s CEO has been there for at least a year and tangible results are surfacing in your new company’s press releases lest you be jumping from the frying pan into the fire.

PS  Isn’t the Jobs-Sculley picture strangely prophetic?  Sculley is leaning on the Lisa, which was the more buttoned-down-and-business-like computer and Jobs is leaning on the upstart Macintosh.  That’s not unlike their styles, personalities, and even their track records.  Today there is no sign of Sculley or Lisa anywhere and the Mac is stronger than ever.  Also, the transition from Jobs to Sculley was a Good CEO Transition and the one back to Jobs was a Bad CEO Transition.  One put the company into a funk for years–so much for ignoring this advice to move on when it’s a Good CEO Transition.  Steve Ballmer represents another Good CEO Transition and an argument to have moved on from Microsoft when Gates left.

The Bad CEO Transition (back to Jobs) brought Apple back to life as one of the World’s Greatest Companies, but even that last miraculous transformation took quite a while–years.  If we look at the Return of Jobs as the Best Possible Bad CEO Transition, that’s another way to get the measure of how such things may matter for your career.

Posted in business, strategy | Leave a Comment »

A/B Testing Your Sales Reps: Stellar Advice from Jason Lemkin

Posted by Bob Warfield on January 11, 2013

Jason and I don’t always agree, but Jason is a prolific blogger and a very bright executive you can learn from, so there’ll be a chance to agree somewhere down the road.  This latest post of his is one I loved.  He’s basically describing the problem of hiring your first Sales Rep if you don’t have an experienced VP of Sales to do the hiring.  The advice is simple:

If you only hire one rep, you won’t learn anything.  You’ll have no idea why they succeeded or failed.  If you hire two, you can look at the differences in style and results as well as benefit from the sum of both of their experience sets.

The analogy to A/B testing for marketing seems clear to me.  If you just make a change and roll it out, you have no idea how that change affected your subsequent results.  You can speculate that it drove them, but you really need to have the placebo in your testing to compare it against.  That’s why A/B testing is so important and I was tickled to see it applied to this problem.  It’s very smart advice.

I have known excellent VP’s of Sales who do essentially the same thing.  There is an old saw about how at any given time 1/3 of the sales reps are making their numbers, 1/3 are not, and 1/3 are so new it is too soon to tell.  Every year they fire the group that didn’t make the number so they can hire a new 1/3 and continue the process of Darwinian selection.  If the company overall misses, nobody fires the whole sales team, at least not if they had been making numbers in prior periods.

 

Posted in business, strategy | 2 Comments »

 
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