Draconis Software Blog

When designing a web application it’s common to see the following user registration process:

1. User fills out the registration form, including their email and password.
2. After submitting, the user is told to check their email for a confirmation link.
3. After waiting for the email, they click the link and are marked as “activated” on the site.
4. The user can now start using the site.

The thinking behind this is that you need to make sure the user has provided a valid email address, and one that is actually theirs.

However, there are a number of problems with confirming email addresses this way. It breaks up the user’s flow; if I’m signing up on a site I’m eager to start using it. Needing to wait for an email breaks that flow.

Second, email is a notoriously unreliable delivery mechanism. Because of the huge amount of spam prevalent nowadays, email providers are especially quick to err on the side of spam, if they even deliver the email at all. Confirmation emails in particular can often appear spammy, as they usually have a long link with a lot of random characters, and often contain only the user’s email address without their real name.

The last thing you want is someone choosing to sign up for your site, only to never start using it because they got distracted waiting for an email, or move on to something else because the email never comes.

Rather than blocking all functionality until the email address is validating, instead consider allowing as much use of the site as possible. When they get to a point where it’s necessary to know that the email they signed up with is correct, you can say something like “We need to verify your email address before you can proceed. Click here to re-send”. This also has the benefit of giving people a chance to re-send the emails if it was missed the first time.

Most functionality doesn’t require a verified email address. The main exception is that you don’t want to send out too many emails without knowing a user’s address. Otherwise, I could signup with someone else’s address and cause them to be spammed. This means you might want to wait on things like notifications (friend requests, direct messages, etc). Other than that, there’s little that’s truly required.

It can be tempting to require a verified email address for all functionality. However, the added complexity is worth the improved user experience.

Xobni and Dropbox, two highly successful VC-backed ventures, had an impressive growth in their users within a fairly short period of time (2 million users within 2 years).  Adam Smith of Xobni has a presentation discussing some many of the lessons learned from the experience of these two startups.

Of the strategies they tried, they used “learn without launching” techniques to gauge market fit: including AdWords tests, landing pages, and building a list of email addresses of people interested in the product.

Their private beta launches were also used to create scarcity and buzz, which further increased their waiting lists.  In addition, they made it very easy for users to tell their friends via social media.  A referral program even resulted in a 50% increase in signups.

Finally, and perhaps the most important point any entrepreneur needs to calculate, the acquisition cost of customers offset by the total lifetime value of that customer.  Finding the cheapest way to acquire customers while maximizing the lifetime value of that customer is the key to any business (some examples, including Netflix, are included).

Check out the slides.  It’s a great set of lessons learned for two highly successful consumer-facing sites that focused on doing one thing, and one thing very well.

There are many great reasons for businesses to blog but one clearly stands out, increasing your keyword rankings and growing your organic search traffic.

via How to Use a Blog to Increase Organic Traffic.

Both on-page and off-page factors are important in building traffic from search engines.  Obviously there’s more you can do immediately about on page factors. Here HubSpot discusses how to optimize blog posts for keywords for which you’d like to rank well.  Selection is important, because you don’t want keywords that are overly competitive, but neither do you want keywords no one will search for.  The route advocated here is to think “long tail” and grow a large set of optimized pages that slowly bring in traffic.

The majority of people online aren’t on the Internet to make money. Instead, they use the Internet for things like entertainment, news, games, and keeping up with friends and family.

However, for those who want to want to start a business, the Internet is a great place to look. It’s a relatively new, growing area that still has tons of potential. Because of its newness, there are almost certainly new sources of revenue still to be discovered and explored. It’s never been easier or cheaper to start a business.

With that said, there are a number of common models that have developed. Each have their tradeoffs with regards to risk and reward, which we’ll compare below.

1. Advertising

Advertising was one of the first business models to develop on the Internet, given it’s long history on paper, radio and television. In the early days, ads were sold like they are on television. They were generally sold on highly popular destination sites, with the goal of being in front of as many eyes as possible.

Google was one of the first to really take advertising to a new place on the Internet. By using peoples’ search queries they were able to target ads better than ever before, while simultaneously reducing the barrier of entry for companies looking to advertise by only charging an advertiser when a user clicked on their ad.

You don’t need to be a search engine to make money from advertising. Indeed, in many cases advertising is the de-facto model for converting a large number of users into revenue. Be careful though: part of Google’s success was that people come to a search engine looking for something, and if an ad gives them what they want, they’ll click it. On many sites, users aren’t necessarily looking for anything, and click-thru rates can be notoriously low.

Investment: Medium. Building a website, hosting it and marketing it requires some capital. However, the idea is to start making money soon after you launch, and hopefully make a return on your investment within a short amount of time.

Odds of success: Medium. As shown in the Google example, there is the potential for a lot of revenue in advertising, but it’s also a notoriously difficult market for websites. Getting a lot of traffic is key here. It also requires you to essentially become an advertising company, which means your real customers are your advertisers, not your users.

Potential return: Medium. It’s very difficult see huge profits from advertising. You’re basically a middleman between other companies and their potential customers, and there’s a limit to how much companies will spend on adveritising. Companies that depend on advertising are also very prone to swings in revenue, as advertising budgets are often the first thing to be cut when times get tough.

2. Promoting an existing product or service

In this case, you already have a business with a source of revenue, be it a restaurant or a law firm. Creating a presence online can be a great way to dramatically expand your customer base.

What’s great about this is that if you’re a profitable business, then you have a proven track record. On the other hand, if you don’t already have a business, starting an offline business can be very expensive (buying property, getting licenses, etc).

Investment: Medium. Again, the main investment is building and marketing the site. However, if you already have a profitable product or service, then you should already have the capital to create an online presence.

Odds of success: Medium to High. What’s key is marketing properly. Simply putting up a webpage doesn’t guarantee new business. On the other hand, keen marketing can make your revenues explode. A great example of this is Wine Library, which started as a New Jersey liquor store and came a $50 million dollar business thanks to the marketing of Gary Vaynerchuck.

Potential return: Low to Medium. While there are certainly cases where a small but successful company can go on the Internet and exponentially increase their revenue by going from local to global, you’re also opening yourself up to a lot more competition. But if your competition isn’t online yet (or isn’t competing effectively online), it’s a great way to get some new customers.

3. Selling an online product or service

The difference here is that you’re creating something new, and usually something that only exists on the Internet. An example of an online product is an eBook, while an online service might be a dating site.

There’s a lot of money changing hands on the Internet these days, and the more businesses and individuals depend on the Internet, the more need they have for other services and products. Subscription models are popular here, where customers keep paying as long as they get the desired service.

Investment: Medium to High. All the costs that exist in the cases above exist here, but multiplied. Not only do you need to create a compelling website, it needs to be so compelling that people will actually give you their money. Similarly, your marketing needs to be good enough to actually convince people to buy your product instead of just going to your site.

Odds of success: Low to Medium. Certain kinds of online businesses can do quite well for themselves. In particular, doing business with other businesses (B2B) is a growing online market. 37signals is a pioneer and great example of this kind of company. Be careful though, as consumers are traditionally loathe to part ways with their hard earned money for an online service.

Potential return: Medium to High. A successful online business can easily make tens or hundreds of millions of dollars a year. The key is to be scalable. In other words, being able to grow from 100 customers to 10,000 customers while remaining profitable. One of the nice things about the Internet is that there’s less friction holding back your growth (you don’t need to spend $10 million on a new factory, for example)

4. Be acquired by another company, or go public

This a trend that’s been exemplified by some high profile acquisitions made a few companies including Google, Yahoo and Microsoft. Since the dot-com era, Internet IPOs are much less common, and there are a lot startups whose main goal is to be bought out by a bigger company. It doesn’t always have to be a billion dollar acquisition by Google; there are many small (under $1 million) acquisitions made by medium sized companies.

This is a risky model to say the least. There are many factors that cause an acquisition to take place, most of which are out of the control of a small business. While Google might acquire your company because it creates synergy with their products, they also might purchase a competitor or just build your product themselves.

Investment: Very High. It’s very unlikely that you will be acquired without having a large number of existing users and/or a proven track record. This means not only building your business and marketing it, but sustaining it and growing it to the point where another company finds value in what you’re doing. You almost certainly need outside investments to get you to this point, which means angel funding or more likely venture funding. This opens up a new set of challenges as you now need to market your business to an investor.

Odds of success: Very Low. For every very public example like YouTube (which Google acquired for $1.2 billion) there are countless unseen examples of failed companies who never see the big payday and run out of money trying.

Potential return: Very High. If you’re one of the lucky examples, you can easily make tens of millions (or more). But remember the odds of this happening are low. Make sure you’re willing to take a big risk for a potentially big reward.

5. Get traffic/users, then choose one or more of the above

This is a bit of a side case that doesn’t exactly compare to the examples above, but is worth mentioning nonetheless. There are a growing number of companies that launch without figuring out how they will make money.

The idea is to focus on getting a large number of users, and that when that happens, making money from those users is comparatively “easy”. Twitter is a high profile example of this, having only recently starting to announce a business model. When the time comes, any of the above models can be considered.

Investment: High. Outside funding (angel or venture) is almost certainly required.

Odds of success: This is hard to say, as the market hasn’t really played itself out for this one. My personal opinion is that the odds are still very low, because outside funding means that investors will want a big return, and it’s unlikely advertising will do that. This means one of two things. Either you come up a really great paid service, and even then you’re at a disadvantage as you now have to either convince people to pay for something that used to be free, or create a really good new idea that people will pay for. The other option is to look for an acquisition, which is also risky as discussed above.

Potential return: High. If you’re able to get a large number of users, you get to start with a big customer base. Or if you sell the company, you can possibly get a nice payday.

If you want help building a business, or just want to discuss a potential business, please contact us — online business is our passion!

There’s a very interesting article up on Apple’s site from Steve Jobs himself discussing the decision to keep Flash off Apple iPhones and iPads.  I thought I’d select a couple of the most interesting:

Flash was designed for PCs using mice, not for touch screens using fingers. For example, many Flash websites rely on “rollovers”, which pop up menus or other elements when the mouse arrow hovers over a specific spot. Apple’s revolutionary multi-touch interface doesn’t use a mouse, and there is no concept of a rollover. Most Flash websites will need to be rewritten to support touch-based devices. If developers need to rewrite their Flash websites, why not use modern technologies like HTML5, CSS and JavaScript?

In addition to the above, there’s also video which: decoding video to display on a computer screen using software requires a lot of the CPU (and kills battery life), while using a hardware-based encoding (H.264) is much more efficient.  Flash didn’t support H.264 until very recently.

We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.

One of the most intriguing points Jobs makes is the concept of being beholden to a third-party to make updates to their libraries whenever Apple introduces a new technology.  With the speed of changes in the iPhone OS, I can see his point.

Perhaps Adobe should focus more on creating great HTML5 tools for the future, and less on criticizing Apple for leaving the past behind.

via Thoughts on Flash.

Many clients have approached us for suggestions to monetize their site, and invariably there are questions about advertising. Although it’s easy to place ads on your site, there are reasons why it may not lead to the kind of revenue you might expect. There are also some drawbacks that need to be considered as well.

Yesterday, we created a Facebook page for Draconis (yes, it took us this long to do it).  For now, it’s just mirroring our blog content, but we may do more with it in the future.

In the meantime, I was curious about getting people to check it out.  Here’s a roundup of some creative ideas for getting people to become your fan: 21 Creative Ways To Increase Your Facebook Fanbase | Social Media Examiner.

As a web developer, I work with a lot of entrepreneurs: some are established and looking for a simple web presence, but the vast majority are building something completely new, and they need help spreading the word.

Marketing online is a huge subject, but the key concepts applicable to most sites are fairly straightforward:

1. Get people to link to you (especially blogs and well-respected sites)
2. Maintain your own blog with frequently updated (and tailored) content, and practice good SEO techniques
3. Consider paid advertising

Getting backlinks

One of the main tasks involved in promoting a new web site is to get other people talking about it. This serves a number of purposes, first and foremost is gaining valuable backlinks, which greatly improve your search engine rankings. It’s also one of the most difficult and time-consuming tasks.

The process is fairly straight-forward. Identify and rank blogs that discuss your subject material. Using a site like Technorati (or just Google) will help you pick out relevant sites. Then, rank them based on popularity and suitability. This ranking will help you prioritize your high-value sites from your nice-to-haves.

Once you’ve identified the sites to contact, work on a compelling pitch. It should be short and get to the point quickly (preferably in the first sentence or two). Be sure to include why the blogger should write about your site, and even include helpful content they might use in their own article. Make the blogger have to do as little work as possible to write about your site. This increases the likelihood of a post.

Once you’ve crafted your pitch, send it out. Be sure to personalize it for each blog though: include the writer’s name, and some relevant notes about why your site is perfect for their blog. Once you’ve sent out the pitches, you need to be persistent (but not annoying). Follow up after a week or so with another personalized note (and tweak your pitch). Bloggers are just like everyone else: they’re very busy and are likely deluged in email every day.

Practice good SEO techniques

Search Engine Optimization isn’t a panacea of web marketing, despite what many snake-oil salesmen might have you believe. SEO is really just the ticket to entry: if you aren’t practicing good SEO, you could be hurting your site quite a bit.

In general, SEO is fairly common-sense: use proper web coding and design practices and don’t play tricks with web crawlers. A good web developer will do this automatically (and a bad one could get you banned from search engines). There are a number of other techniques you can do, however, that can make a big difference.

The key here is to update often, and to tailor your updates to the kind of keywords you expect your target users to enter into search engines. As an example, if you’re a toy company, you’ll want to tailor your content to mention key toy-related words (“action figures”, “dolls”, etc). By doing this, you’ll be setting up relevant information for people in your key demographic, who are more likely to come to your site when searching for “action figures” or “dolls” on a search engine.

Updating frequently via a blog is also helpful in SEO because it gets search engines to crawl your site more frequently. Why is this good? Well, for one thing, search engines are increasingly interested in the timeliness of the content they crawl. Information that has just been posted online is presumably of greater interest to web searchers then content from years ago. Keeping your content and web site updated frequently can be helpful in your search engine rankings.

Paid advertising

The first two aspects noted above are considered “organic” web marketing, and can have the biggest impact on your site. The downside is they are extremely time-consuming to implement. For some sites, however, paid advertising makes a lot of sense (especially if you have something of a budget). It’s a quick way to start getting your site noticed, and it can be quite affordable.

Paid advertising comes in two flavors: CPC (Cost Per Click) and CPM (Cost Per Thousand impressions). The former is the typical model of search engines like Google, where you pay some amount each time a person clicks on your ad in search results. CPM, on the other hand, is often used on higher-traffic destination sites, and you pay a certain amount to show your ad to visitors (an impression is every time a page is loaded).

In general, you’ll want to start with CPC and then consider branching out to CPM, primarily because the barrier to getting started with CPC is so minimal. In fact, all you need to do is setup a Google AdSense account, write some ads, and set a daily budget, and you could have ads showing today.

So, just how effective is paid advertising? Well, it depends on several factors: how much time and effort (and money) you’re willing to put into your campaigns, and how effective advertising is going to be for your target user.

Tailoring CPC ads via Google and other search engines requires a lot of fine-tuning. You should be familiar with A/B testing, landing pages, and willing to experiment with your content. It can take quite a bit of time to nail down a highly-optimized paid advertising campaign, and you’ll need to work with your web developers to get the landing pages just right. Once you have a well-oiled advertising campaign, it should start paying for itself (and you can even track those conversions automatically).

CPM advertising is a little different, and usually involves some graphic design. You’ll often need to put together some catchy-looking web banners and corresponding landing pages to create a successful CPM campaign. You’ll also need to do your research: finding the right web site to place your banners requires you to get in depth on their users. Make sure you’re buying ad space on a site that reaches a lot of your target users, and tailor your web banner and landing pages to them explicitly.

Wrapping Up

Web marketing is a complex subject, and the key takeaway here is that it’s also time-consuming. With a good team at your disposal, you can avoid many of the mistakes of inexperience (some of which can cost you greatly).

Ultimately, it’s a process of fine-tuning. As you experiment, you’ll learn what avenue and message works best at reaching your target customer, and what web marketing techniques result in the highest return.

At Twitter’s recent Chirp conference, they announced a new “user streams” feature that allows users to receive a real-time stream relevant to them. Today they opened it up for everyone to play with.  They’re very quick to point out that the service is still in development, so we shouldn’t expect any new applications in the near future.

Even if you’re not a developer, there are a few neat things in user streams, which you can expect to start seeing once this functionality goes into production. There are a lot of actions that Twitter users take beyond actually posting tweets. The user streams function opens all of this up in real-time:

• See who your friends follow. In real-time, you can see who you’re friends are following and unfollowing.  Sometimes, you see people follow a bunch of users in bulk (I’m guessing they’re using a script to automatically follow back their new followers).
• See favorites and retweets in real-time. Currently, favorites aren’t very widely used, but I could see this growing over time.  A real-time look at what your followers find interesting could be a great way to stay up to date.
• See all your friends’ replies. Last year Twitter had a minor controversy when they disallowed users from seeing every reply their followers sent.  Instead, you could either turn off all replies, or only see replies when you also followed the replied user.  In user streams, all replies appear to be open again.  I could see this being a great way to find new people to follow, by seeing who your friends are talking to who you don’t follow yet.

All together, I see this creating an entire secondary sort of twitter stream in addition to your main friends timeline. The combination of following, favoriting, retweeting and reply events in real-time can provide a very interesting look at what’s happening by-the-minute in your circle. Tools to aggregate this data can provide a different service, by showing you trends that you might have missed among users who are gaining followers, engaging in conversations, and being favorited.

Ever since Twitter disabled access to their firehose last year, many users have been waiting with baited breath for its return.  The “firehose” refers to the stream of all public Twitter posts.  Currently, it’s only possible to get a small subset of all public posts, and many types of Twitter applications aren’t possible without access to the firehose, such as real-time track and trend analysis.

For a time, Twitter planned to allow firehose access through a service called Gnip, but in October stated that they would instead work on providing access themselves.  Since then, details have been sparse on the timeline or methods for which access will be given.

Last week however, some more information has been quietly released by means of an FAQ on the Twitter API website.  Here’s the question and answer in full (emphasis theirs):

When will the firehose be ready?

By late January, early February 2009. For at least Q1 2009, the “firehose” (the near-realtime stream of all public status updates on Twitter) will only be available to a small group of trusted partners. The firehose is a stream HTTP solution; a client connects to it and the stream begins, ceasing only when the client disconnects. Once we’re confident in the stability of the service, we’ll add partners on a case-by-case basis. We may allow a wider selection of clients to consume subsets of the public stream (that is, updates from a collection of user IDs or matching specific search terms). We do not intend to allow anonymous, unregulated public access to this stream for any number of legal, financial, and technical reasons.

There’s a few pieces of new information here.  First, that some kind of beta group will be given firehose access within a few weeks, using HTTP streams.  This sounds similar to the solution provided by Gnip to their users.

Perhaps more important though is the news that a full public stream of the type previously provided will not be returning.  While providing subsets of the public stream could be useful for things like groups, without the full firehose it’s very difficult (if not impossible) to provide a feature like real-time tracking, which has been eagerly awaited.

The three pieces of rationale for not making the firehose public (“legal, financial, and technical”) each bring up additional questions in turn.  Legally, is there a difference between providing public tweets in a full stream and providing tweets publicly by user (which requires knowing the username ahead of time)?  Do the financial motivations refer to saving money on servers and bandwidth, or by making money in providing access for a fee?  And technically, are the existing solutions (such as HTTP streams or XMPP) insufficient for the task, and if so, how?