Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2019. They also look back at their 2018 predictions and rate how they did.
Items mentioned in this episode:
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I’m kind of stoked that my first book Start Small, Stay Small is now out live on Audible, only eight short years after I originally recorded it and have been selling the audiobooks. What happened is back when I published the book and I recorded an audio version within a few months of releasing it, Audible wouldn’t let individuals post audiobooks. I couldn’t, there was no user ability, and I emailed then and said, “Hey, I self-published a book, it’s popular, it’s getting traction and such, and I have a podcast. There’s a lot of people who want to hear the audio version but how do I get this in there?” “Yeah, we don’t really offer that. You have to go through a publisher.”
I just never did and I’ve been selling basically the audio version from the website startupbook.net is where kind of Start Small, Stay Small lives but within a few years, I think they did release the ability to do that and then it was just wasn’t a priority when I’m building and growing companies and running conferences. It’s kind of the last thing on the list. I’ve had the last several months off, as you know, and I had the audio files. They had to be re-engineered and remastered. It’s still the same reading but it had to be re-rendered at a certain resolution or whatever and luckily, I still had the original source files from 2010 because the MP3s I had been selling are not at the bitrate that they need for Audible these days.
I literally pulled them off of DVD-ROMs from our old editor for whoever is editing this in 2010. I pulled WAV files or something off of DVDs and put then in Dropbox, which is just amazing, because back then it would have been on DVDs because there was nowhere else to store them. That was my long-term storage for these things. Our editor, Josh, for this podcast, he did a nice edit job on them and it’s now live.
We’ll link it up in the show notes. It’s for posterity. I just actually just purchased it and I’m downloading it because I haven’t listened to the audio book in forever because it’s not easily accessible. When it’s not in my Audible app, I just don’t really listen to audiobooks. Do you? If someone sent you an audio book of 12 MP3 files, you can’t to exit, it’s not easy to open it in an app. It’s a little bit clunky.
Mike: Yeah I probably would not. I think I used to throw things like that in iTunes and I’d be able to listen there but unless it was quick to grab, probably not. I actually didn’t think about taking my book and put it out on Audible. It’s one of those things that’s been such a low priority for me to even look at. Now that you mentioned the bit rate, I went back and I’ve looked and I was like, “Yeah, I’m pretty sure that what I’ve got is not enough.”
Rob: Yeah, The nice part is we do have Josh as a resource. As long as you have the pre-MP3 or whatever, if it’s M4As or I guess it’s AIFFs or the lossless and WAVs, then you could send those to him and he can re-render them in a way that Audible will accept.
Mike: Yeah, I’m not sure if I do.
Rob: But it’s still a project. It’s still a project and you have to get cover art. It wasn’t 20 minutes of my time. It was a few hours of my time and at that point, is it worth doing is a question that should probably be on your mind.
Mike: Yeah and that’s part of why I haven’t done it is because just hasn’t been worth my time to do that.
Rob: That makes sense and one of the things I’m thinking about, if you go to startupbook.net, I sell bundles and I sell an EPUB version plus a paperback version plus an audio version and you can buy in different combos. In 2010 that made a lot of sense and it’s literally fulfillment through PayPal, I built the fulfillment thing because there was no Gumroad. It was barely Kindle Books at that point. I built a bunch of stuff myself and as I’m looking at it, I still get sales of this book.
I’m thinking to myself, I don’t even know that I want that anymore. I kind of just want to link out. If you want the audio, go to Audible. If you want the electronic or the paperback, go to Amazon and everything is handled. Obviously, I make a little bit less money per copy because they take their commission but it just eliminates that thing that I had to maintain.
Mike: Yeah. And that means just simplifying things on your end from just because a process that makes things easier. It becomes the distribution channel for you and then you only have to deal with that versus all the other things that you’ve kind of hacked together over the years. I have the same thing with my book. Everything’s done through Gumroad and I just haven’t changed it because it be a pain-in-the-neck change.
Rob: So, how about you? What’s up with you this week?
Mike: Well, I’ve been planning out some of my Blue Tech marketing efforts that I want to start in January and been looking at things like putting together a set of webinars. I’ve been expanding the number of emails that are into some of my various email campaigns. Just that those are a little bit longer and they lead directly back to Blue Tech a little bit better. Putting in some automations there and just kind of thinking of more about how the different pieces connect to one another and how I can help move people through the sales funnel a little bit better than I have in past.
Rob: That sounds like a good project to be starting after the new year and to be thinking about it and planning it now so you can hit the ground running right after the holidays. I was thinking it is January 5th is the date in my head and that’s probably a Sunday this year. But between January 5th and January 7th is where we would resume big pushes of marketing.
Mike: Yeah. I’m really just planning out what needs to get done because nothing is really going to happen between now and the end of the month. There’s stuff that needs to get done and preparation would take longer even if I wanted to try and launch it. Next week just doesn’t matter so I’m planning the things out, going to do the work between now and the end of the year. Once the calendar flips over, release are pushing on some of those things. By that point, I should be ready to go live with them.
Rob: Sounds good. What are we talking about this week?
Mike: Well, we are going to go into our predictions for 2019 this week. But before we do that, we’re going to go back to episode 370, talk about our 2018 predictions, and see how well we did.
Rob: Dive into your first one. We’ll do a 1-5 scale on these.
Mike: Sure. The first one, I had said there was going to be an economic downturn and I said that things looked pretty good last year about that time, that there’s a lot of uncertainty. It felt to me there were some economic problems that were starting to build up and there weren’t any easy solutions. I kind of pointed to the health care. I don’t want to call crisis but health care problems for small businesses in the US are pretty bad. It’s just awful trying to figure out how to deal with that.
Also looking at the idea that there might be a rise in unemployment, I didn’t think that the housing market was going to go down very much but it felt like was going to relatively flat and I also thought that the stock market was going to level off but not go down. Most of those I would say, it’s hard to judge somebody because it’s not like there’s a standard or number that you can point you for most of them with the exception of the stock market.
Rob: I would say unemployment is well. Unemployment has not risen. Unemployment is at historic low. That one, I think that piece I don’t think you’ve got. I think stock market, it’s leveled off and gone down.
Mike: Well, if you look at from January 2nd to today, it is down by 300 points. It’s pretty close. I mean, that’s real close and in terms of unemployment, I think the actual number has gone down but I also think the number of people looking, who are actively looking, or has stopped has gone up. That’s hard to measure.
Rob: Yeah, I know. I agree but the other two I don’t know. Small service businesses will go out of business. I don’t know that that’s really happening yet. You’re kind of talking about a recession at that point and we’re not in a recession. Housing market won’t go down very much. It will relatively flat.
Mike: I think I was wrong on this one. I think it’s gone up a little.
Rob: Yeah, I think so. I would say such. I mean, real estate’s local but there can certainly be national things. What score do you give yourself on this? It’s not a one but it’s not a five, either.
Mike: Yeah. I’d say three on this one because of those four things that I listed, the stock market will level off but not go down. I would say within 500 points either direction is still leveling off because they could swing by 500 points in a day. I would give that a five but in terms of the housing market won’t go down very much, I thought that it was going to go down and it did not. I would say that’s a one.
I think if you would average all these things together and going to the other one like small service business going out of business due to their taxes and healthcare, I don’t think that happened. The unemployment rise, I would say, according to the numbers, that says no as well, but I think if you were to dig deeper, then there’s a lot of people who stopped looking for work. I’d give that maybe a four and the other one a one. Average is probably around three, something like that, maybe a little bit less but pretty close.
Rob: My first prediction for 2018 was that 2018 will be the year of non-institutional startup funding: angels, crowdfunding, and ICOs. If I were to rephrase this, I would not say non-institutional. I would say non-traditional or it will be the year of alternative startup funding. In hindsight now looking back, it’s like I have this inkling of something.
When new ICOs were happening, the opposite cooled off at this point but I do know that they’re still in play. I think crowdfunding has been so-so and I’ve seen a few like Hacker Noon is crowdfunding. But really the Tiny Seed model that I’m thinking about where it’s a way to get money that doesn’t look like traditional institutional venture capital, where it feels more like an angel investment but it is technically institutional money. It’s these alternative funding sources for people who would normally bootstrap frankly. There’s a whole revenue-based debt financing, like Lighter Capital, Bigfoot Capital. There’s a few others in that space and then there’s more than […], the Tiny Seed thing, that area that I see percolating and starting to happen.
Well, obviously Tiny Seed is just getting started now. Really 2018 was the year it announced but it’s not really going to be in full swing until 2019. That’s not completely accurate. I certainly would not give myself a five on this. I will say that I’ll probably give myself a three. It’s either a three or a four and I tend to want to be a harsh critic of my own stuff. I will say that it’s about a three but I actually think this is worth the beginning of a wave above all these non-traditional options.
That is why I am devoting the next several years of my life to basically starting a company and then fund an accelerator in this space because I think it’s going to be big. This prediction is I think it’s correct. I just think it’s perhaps a tiny bit too early.
Mike: I think you cheat on these things sometimes.
Rob: Why? Tell me.
Mike: Look, because you make a prediction and then you’re like, “Oh, if this isn’t going to come true, I’m going to do it and that will make it true.”
Rob: That’s how entrepreneurs cheat, huh? That’s so funny.
Mike: I mean, I surely call you out of that.
Rob: Yeah, Mike, appreciate that. I think if we have the power to do that, then we probably should. If we have the power to change something that we think should exist, that’s funny. I haven’t thought of it that way but it’s a good point.
Mike: Let me know how that works out for you in Vegas this year.
Rob: Yeah, totally. How about you? What’s your second prediction.
Mike: My second one was that we would not see a US-based legislation around in-app purchases and classification of loot crates as gambling. I don’t know that we ever actually saw that.
Rob: I think it died down.
Mike: Yeah. There was a lot of talk about it initially, and then after that, it just kind of went away because the game makers decided, “Oh, we’re going to change how these things are done,” and it just kind of silently died.
Rob: Yup. My second prediction was that artificial intelligence and machine learning would continue to be marketed as the next big thing but would not deliver again in 2018. Specifically, I think I was talking about how every marketing SaaS app says, especially the venture phone that wants, “Oh, we’re going to be AI for email or AI for you landing pages or machine learning for your data sets to do blah-blah-blah.”
Everybody’s marketing and really most people don’t have the data sets that are big enough to actually use machine learning. A lot of the machine learning winds up just saying, “Oh, it’s noise anyway.” It’s really hard to do this right and my prediction was kind of people would continue to over-promise, use it as a buzzword to raise funding and make promises that would kind of come true maybe a little bit but that it was not going to be of this thing of like, “Holy crap. Someone really finally made this happen.”
My personal opinion was this is a five. I definitely continue to see AI and ML in both startup pitches and on marketing websites, and I have yet to see something that has been a ground-breaking shift in specifically a MarTech app or really any kind of SaaS app that I’m looking at.
Mike: My third prediction was that Uber is not going to regain the ground that they’ve lost and that was kind of based on a lot of the scandals that were plaguing the company. I did a little bit of research on this and one article I found pointed to the second quarter of this year where they lost almost $900 million and then there was another article I found where they were just kind of graphing the Uber-versus-Lyft market share. Lyft is continuing to go up and Uber is continuing to go down.
I don’t know how much of that I would attribute to the fact that now there’s a second entrant, but at the same time if Lyft is eating into Uber’s market share, then it’s because they’re growing and they’re growing faster than Uber is. I have a hard time on figuring out whether or not that means that Uber is not regaining the lost ground.
Rob: I think that you are correct on this. I think this is a five based on market share. That’s what I would’ve thought when you said regain the ground they’ve lost, where losing money is nothing new for them. They’ve lost hundreds of millions, if not a billion dollars every quarter, I think, for years, which is why they had to risk so, so much money.
To the part, I’m not concerned but you wrote this prediction around the time where there was the big kerfuffle where Travis the CEO got kicked out, and there was the big article written about or several articles written about the toxic culture and the bro culture, and then he became kind of the poster child of “what’s wrong with Silicon Valley companies.” It’s not in quotes because its not real but it’s just the thing that happened at the end of 2017 was that a lot of this stuff started coming out.
I have not seen a graph of market share but if you saw a graph where Lyft is going up and they’re going down, I think very much that, that was partially caused by—not entirely caused by—that whole kerfuffle that went down. I always now look for Lyfts first and I used to always look looked for Ubers first. When this all happened, I switched. I know a ton of people who deleted their Uber app altogether. A lot of people don’t want to support a company that acting that way toward its own employees.
Mike: Yeah, definitely. The reason I was a little confused about the graph was just because it’s a trend line that basically shows that and it doesn’t really change. Uber’s market shares continue to go down and Lyft’s is continuing to go up, but it’s showing that back as early as 2016. Is that directly caused by that? I don’t think that it is. I think that it’s just that Lyft is doing better in general than Uber is and it’s kind of eating them alive at this point.
I do think of those other things that we’ve just talked about kind of play into that. I don’t think that I see them recovering from this anytime in the near future and I don’t think that it’s just because of the PR things or the things are going on internally. I think that it’s just they don’t have a good sense of how to basically break ground against Lyft.
Rob: Right. You’re saying it’s like Lyft kind of is doing a better job of executing or whenever. I don’t disagree with that, that it’s just a competition that Lyft has hit their stride and that Uber had enough stumbles that they’re getting ground made up on them. I still think Uber is an amazingly wildly successful company, it’s still worth a ton of money, and I do think they’ll be fine.
Both of them have filed for IPOs. Both Uber and Lyft should have an IPO in the next, I don’t even know, two, three, found months. There’s going to be massive liquidity and there’s going to be deck of millionaires and millionaires coming out of both of those. It’s interesting to think long term. Will there be a two of them? Will they ever consolidate? I don’t know. I mean, they’re both still pretty healthy. Even as hard as Uber got hit, it’s still, I think, quite a successful company. Obviously it’s losing money and there’s this argument to be made. Could it withstand a recession or whatever? But I just think they just pulled back growth. They are actually making profit.
My next prediction for 2018 was that there will be an enormous crash in Bitcoin’s valuation but the long-term I’m still bullish. What do you think? You think I called this one right?
Mike: I think you hacked somebody’s servers and made this crash happen, because you’re an entrepreneur, right dude? You make things happen.
Rob: I did not do that and I give myself a six on this one. It was just an inclination, just the volatility of this whole space. Sometimes I say these things because yes, I own many different cryptocurrencies. I was saying this to my head of there going to be a crash so that I’m prepared for when it happens. It’s kind of the worst case scenario but I definitely thought that there would be some volatility. Got lucky on this one.
Mike: Yeah, especially when you saw that coming and in the middle of that run up, too, like you have to be very aware of the fact that it is run up and how much longer is this going to last before it pulls back and how hard is it going to pull back. Yeah, you were definitely right on this. I give you a six on it, too.
Rob: Yeah, I mean Bitcoin went from $1200 to $18,000 in 18 months or something? Maybe is it even 12 months? It’s insane. Yes, at the time there was irrational exuberance of people where like, “It’s going to $100,000. It’s going to $200,000,” and I was just kind of like, “I don’t think this has the staying power in the short term,” but again, I set out long term. I’m still bullish and I have another prediction this year about it.
My fourth prediction for 2018 was that cryptocurrencies will be regulated by several large governments and this has happened. I think it’s been quite a bit of a regulation in different countries around the world and I think what’s interesting is the longer cryptocurrencies are around, there’s less of a question of, “Oh, it’s this new thing. Is it going to stick around?” It’s more like, “Yes, it’s going to stick around. How do we classify it? How do we regulate it? How do we measure it? How do we tax it?”
Maybe the crash helped it. It’s like become this thing that’s just there that’s just hanging around. I think it’s going to become more and more of a ubiquitous part of kind of what we’re doing to it today.
Mike: You want to kick us off for 2019? What’s your first 2019 prediction? You said you’ve got something for this year.
Rob: Indeed. My first 2019 is a crypto prediction. I think there will continue to be ups and downs in 2019, just continued volatility across all the cryptocurrencies but there will be no major boom in 2019. There will not be a run up like we saw last year. But I am still bullish long-term, I want to be clear. I still own cryptocurrencies but I don’t think we’re going to get the 200%, 300%, 500% bump up that we saw on 2018. I think it will either be just a gradual thing over the course of the year or it will just bump along up and down and I thinking in the future year, we’ll once again see a run-up like we saw.
Mike: Do you think it’s kind of done being highly volatile because even just in the past several weeks, it’s lost half its value. That’s a lot or at least the reports specifically talking about Bitcoin because obviously each cryptocurrency is different but most of them tend to track on Bitcoin’s progress.
Rob: I think it will continue to be volatile and it’s just the nature of it for now while it’s this unknown entity. This is asset class that people aren’t exactly sure what to do with it. I think there’s still going to be people manipulating it, which causes some of the volatility. I think there’s still going to be people speculating it, which causes volatility. That’s my gut feeling.
Mike: Yeah. I look at Bitcoin and the cryptocurrencies. They are one of those things where I wish there was more regulation around it but I also understand why there’s not going to be any time in the very near future. Obviously, governments are making an effort to do that kind of stuff but until there’s federal backing and an insurance on it, there’s going to be a lot of stuff that happens. The exchange gets cracked open and they’d lose all the Bitcoins, everything. That stuff’s going to happen. There’s not much you can do to prevent it. That’s going to help cause that volatility.
Rob: How about you? What’s your first prediction for the year?
Mike: This was a little bit of a tag on the last year and I think that there’s going to start to emerge a global downturn that’s going to be in full swing and it’s going to be obvious. I think before, we were seeing signs of it. I’d say last year’s prediction was probably half-right-half-wrong and I think that’s going to continue, not me being half-right-half-wrong but the downturn, so to speak.
I think we’re going to start seeing more signs of it. I’m hoping I’m wrong but I see these little things happening here and there and it just makes me wonder because it kind of goes back to 10 years ago or so. I don’t think we’re going to hit a global economic recession that causes some massive crisis like we did last time back in 2008 but I do think that it’s going to be noticeable.
Rob: I think either you or I make that prediction every year and has for three or four years. I hope you’re wrong but I’m thinking that you’re probably going to be accurate on that one.
Mike: Is that like predicting it’s going to rain eventually—
Rob: Eventually. It’s kind of. I think that’s kind of what we’re doing here.
Mike: Okay.
Rob: My second prediction is, in 2019—this is a bold one—will be the year of augmented reality. Really deep down, I question if it will but I wanted to make one at least one prediction that I was super unsure about. It’s kind of a big proclamation. I kind of want AR or VR to catch on. I want it to be cool and accessible and I want to do stuff with it, but every time I tried VR, it’s like, “Meh. It’s not there yet.”
I think that AR is probably a more viable thing because you’re not sitting there with a big old mask on your face, you can’t see anything else in the room, whereas AR, there just so many real applications of it that I think can take hold. Whether 2019 will actually be the year of it or whether it will take longer is another thing but my prediction is it going to be this year, Mike, in the next 13 months.
Mike: Now, when you say there’s a whole mess of applications that it could be used for, are you thinking more consumer or you thinking more like industrial- and factory-type things? It seems to me like that would be the place where I would start and then eventually would move over into mainstream consumer because I don’t see anything out there where augmented reality is really something that people would buy into just yet. I definitely see the industrial applications of it but not like practical things that people would use on a regular basis.
Rob: Yeah. I like the way you’re thinking. I mean, that’s what I’m thinking about as well. When I say practical applications, I do mean kind of B2B stuff which means people will pay money for it. If you’re on a factory floor, you can you look over and whatever, see the instructions, how to do things, or you can see the inventory levels. If you’re surgeon, when you look down at a patient and there’s an overlay of what should be there and where you should cut or whatever. It’s incredible for pilots, for all kinds of applications where this could work.
Now I also think that even on our phones, you can imagine having Yelp augment reality around. You hold your phone up, kind of like have you ever done the ones where the apps where you can look at the stars?
Mike: Yeah. I’ve seen—
Rob: You hold them up and that’s essentially augmented reality. Those are cool and those are fun but what are the consumer applications of this? Could you hold your phone up as cars are coming through? You hold your Uber app or your Lyft app up and it will just have a big sign over your Uber? Especially when you’re at a crowded airport, it’s often hard to find things out. They’re trying to do it right now with these lights that sit on the dashboard but what if you’re able to hold that up and just see? That’s maybe a clunky example of it.
I think once we get some contact lenses or some better version of like a Google Glass type thing, that would be even better because then you don’t have to hold your phone up and it’s just kind of projected into your eyes so that you can see things that are augmented, which is not going to happen in 2019. But those are the kinds of, I think, consumer applications that could do it but I think you’re probably right. I think B2B may be the place that makes it work and makes it more affordable.
Mike: You answer my question throughout even though I didn’t directly ask it because what I was really interested in was how do you see it working and what it sounded me like you’re saying is it’s not wearable but it’s kind of on all time. You’re carrying your device around and then you can use it in certain situations when you recommend a situation to augment the data that you receive and it would show you, “Hey, this is what you should be exactly looking at.” It’s a difference between something like Google Glass that you wear all the time versus you pull out your phone and then see the additional stuff.
Rob: Right. That would be the idea. I don’t think that you’re going to wear this stuff all the time. Most people aren’t going to do that unless you’re on factory floor and you might need to, then you do put on safety goggles and maybe it projects under your eye. If you’re surgeon or dentist, they often wear the glasses anyway that have a magnifying something or other, have augmentation there. It just makes a lot of sense and they don’t wear those all the time but they wear when they’re doing surgery o when they’re doing a procedure. Same thing perhaps for pilots. I don’t know if it would be and they already have heads up displays in certain aircrafts but that’s where it just makes more sense and you don’t have to do extreme behavior changes for people to do start adopting this.
Mike: Yeah and you don’t have to worry about the social context or social problems that are associated with that stuff. When I think about some of this stuff, it kind of reminds me of a project that I worked on at Wegmans back in I think it’s 2000-2001 where they had this voice recognition unit and I had to program things to integrate into the wireless system for the warehouse.
I got to a spot and there’s all these people wandering around the warehouse with these power lift jacks. They had to grab things at a warehouse so they could put on the trucks and they would just talk to this thing and it would tell them what it is that they needed. Fast forward 15 years and now tablets exist and you can do that kind of stuff now in a visual format that whereas before it was just text only, speech-to-text recognition.
My second prediction for 2019 is that esports leagues will get a dedicated TV channel and having done the research on this after the fact, I realize now that there is already one in existence.
Rob: I was going to say I think this exists that’s not Twitch.
Mike: Yeah, I didn’t realize it. That’s the thing is that it was not going to be Twitch. Obviously, there’s streaming systems out there, obviously. People stream out on YouTube. My kids watch that stuff constantly. Whenever they get a chance, they want to watch other people playing video games. I had this discussion with my half brother. His comments on it was, “You will watch a football game or a baseball game. How is watching somebody play video games any different than that? You’re not involved, you’re not directly playing, you’re just being entertained by the fact that somebody else is playing.”
It’s a good point to make and I think that it especially applies to people who grow up around this technology and are able to watch other people play those types of things versus back when I was a kid, you either went to a ball game some place or you watch it on TV. Now, there’s other things that people are finding interesting like esports leagues and video games. They want to watch that stuff as well and they have their own personal heroes and people that they follow.
Rob: Right and I feel the same way as you do about it. It makes no sense to me which truly proves that we are old and that people should get off our lawn but my kids, at least my oldest is really likes it. Something that I realized is it’s not just that he is watching someone else play video games. It’s that this someone else is way better than most people, who’s way better than him at it, and has witty banter, is saying funny things so they’re entertained along the way.
It’s not just like when we used to go to an arcade and when your buddy was playing Donkey Kong, you are bored because (a) your buddy wasn’t saying witty things and (b) your buddy wasn’t that good at it. He wasn’t any better than you are at it but if you put those two things, if you would sat and watch someone live on a stand-up arcade machine who is making these hilarious quips, doing well on level 50 when you can only make it to level 5, that actually is intriguing when I started thinking about what’s actually going on there.
I’m personally not a fan of esports in terms of I don’t watch any of them but I think I’ve seen the appeal and how it could appeal to folks who are into it.
Mike: Yup. I’m going to cross this one off just because it’s not applicable but I came up with that and I was just like, “Oh, I think that this could be a thing.” Oh well.
Rob: Yeah. That makes sense. Cool. My third prediction is that Facebook will face antitrust issues and due to that, whether it’s negative press, they are not having a great couple months right now. I think it’s going to get worse for them and I think that it’s going to open up a possibility of there being a new social network that comes about in 2019. I don’t mean the next Facebook but much you would say Instagram is a social network or you’d say these messenger apps like WhatsApp and Snapchat that are called social network.
These aren’t things that just replicate or replace Facebook, but they are new forms of it and a new takes on social networking and I think that door will open even wider based on perhaps, I don’t know if I’m going so far as to say that the declining used to Facebook, but that at least I’m imagining growth is going to slow down pretty precipitously for them.
Mike: Wouldn’t the growth slow down just do a market saturation as well?
Rob: I’m going to get a five on this, Mike, just because. You just gave away my secret. No. It might. I haven’t honestly look at that. I mean, to be honest the prediction is not that growth is going to slow down. My prediction is that Facebook’s going to continue to face antitrust issues or start facing antitrust issues if they’re not already and that, that will make way for the rise of another social network to come. Frankly, maybe Facebook buys them, too. It’s not I have a question. They bought Instagram and it was a good call for them to do that. I think there’s a two-part prediction basically.
Mike: Got it. I just wanted to clarify that last piece. I’ll call this my second prediction here. I think that there’s going to be something “bad” that happens involving Tesla, SpaceX, or Elon Musk, possibly at least two out of the three. Looking at it, I don’t know how to define something bad. I don’t think anything is going to specifically happened to Elon Musk like he gets in a car crash and dies—but that’s certainly obviously a possibility—but I think it’s going to be more likely that he starts making some bad decisions.
I mean he’s already had to step down from his CEO position at Tesla because of some of things that he said on Twitter that influenced the stock price. The SEC came after him and basically he had to pay these massive fines, step down for three years, and I feel something along those lines is going to progress and maybe he has to step away, maybe they push him away from Tesla because maybe he can’t keep his mouth shut or something along those lines. I don’t know what but I just kind of have a feeling about that based on what I’ve seen in his behavior. Seems very erratic.
Rob: Is this a prediction or it kind of a continuation of what’s already going on? Like you said, something bad has already happened. He’s been, basically, asked by the SEC to leave. He had to settle with them because they were going to sue him—I don’t know if that’s the right word—they were going to do really bad things.
Mike: They fined him, I think it was $20 million and they made him step down as CEO for a period of three years.
Rob: Yeah, for three years. That’s something bad has already happened to him. You’re just saying something else bad—
Mike: I’m saying something else, which is going to be in addition to the stuff that has already happened. Maybe he does something else and the board says, “Look, you’re out,” or SpaceX gets some contract and instead of putting something into space, that thing blows up on the way up or it’s trying to land it and the thing just gets destroyed. It’s not going to be one of their tests. It’s going to be something actually important. I think something like that is just going to bite them. I don’t know what.
Rob: Oh, Mike, this is such a morose prediction, man. Geeze. I hope—
Mike: I don’t want it to happen.
Rob: You’re like the shorts, the people who bet against the stock market. They’re right sometimes but nobody likes the shorts because they’re negative. They’re basically against the marks. You’re kind of betting against these companies. I’m not saying that no one should like you. I was just pointing out that there is a similarity. That was a weird thing to go down.
One of the predictions I’m most proud of actually, Mike, one that I remember is, I don’t remember if it was 2017 or 2016 but I predicted that, I was contemplating that Twitter would have major issues, that they would see their growth decline because they were growing super fast and they were just one of the many social networks.
Obviously, Twitter has continued to have a slide. I’m actually proud of that one. I picked the year, stumbled upon the right year that they did start to decline. My prediction for this year 2019 is that Twitter gets acquired by someone. I don’t even have a guess as to who. There are public companies. They have to be obviously—
Mike: They got acquired by Tiny Seed. I’m calling bull…
Rob: There it is. Nice. Making stuff come true, am I right?
Mike: Yes.
Rob: That’s good.
Mike: Yup. I mean it’s certainly possible. I don’t know. Isn’t Jack Dorsey the founder, right?
Rob: He’s one of the – I mean, Ev Williams was the founder, yeah.
Mike: Yes, one of the co-founders. He’s the CEO right now and he’s also the CEO of Square, isn’t he?
Rob: Yeah.
Mike: Got it.
Rob: Which is got to be interesting. It’s got to be a challenge.
Mike: Right. I don’t know. It seems like he’s got, I don’t want to a stranglehold on it but it seems like he’s trying really hard to manage all the problems that are coming up inside of Twitter, with people harassment, and things like. I don’t feel like he’s doing a particularly great job but at the same time not tracking every single thing that they’re doing and how they’re handling stuff. I definitely see situations where it’s just handled really, really poorly and everyone seems to think that except him, but I don’t know. It’s an interesting prediction.
Rob: Yeah. That’s been a criticism of Twitter for the past year or two, is that they’re just not doing enough to send the harassment. They don’t have verified accounts anymore or they have them but you can’t get verified anymore and they say, “Hey, we’re going to come out with a new verified process.” That was ages ago and there’s no new process. What are they doing in there that they can’t get the stuff done has been a criticism.
I don’t care that much in all honesty. I’m not a captain. I’m on Twitter all the time. I’m on now and again but it’s not something that’s part of my daily or even weekly regiment but I think that they are going to be ripe for an acquisition. I don’t know if their acquire will be able to turn this stuff around or not but that’s probably what the intent will be.
Mike: Yeah. I’m trying to think of who would even acquire them and I don’t know who that would be.
Rob: Facebook, Microsoft. No, I don’t know. I’m just kidding.
Mike: My last prediction is that Amazon is going to overtake Apple in terms of net worth.
Rob: Market cap?
Mike: Market cap, yes. I know it’s sort of close but I think that they are going to not only overtake them but in a solid and definitive way. I think they’re both somewhere in the $800 million range or something like that and I think Amazon is going to surpass them. They may even be the first to hit $1 trillion or did Apple hit that at one point then drop?
Rob: Apple hit it. Yup, they already hit it.
Mike: But anyway, I think Amazon is going to be solidly in front of Apple and the only way I see that not happening is it if they take AWS and spin it out as its own subcompany and it’s independently operated, which is also a possibility, I think.
Rob: Yeah, I do, too. I think that’s an interesting prediction especially given you’re talking about this global downturn, which would imply that stocks will continue to slide and they’re both, in theory, going to go down. You’re predicting that Apple is going to go down more than Amazon, if you tie those two predictions together.
Mike: Yeah, I guess so. I don’t know. It’s hard to say whether or not both of those would actually go down. I do think that Apple is probably headed for a downturn. I think that they’ve saturated the market so much at this point with their phones and that recently they started increasing the prices and they said that they’re not going to continue releasing sales numbers for units. I think that’s what it was.
Essentially, what they’re doing is they’re kind of hiding what their actual sales are in terms of what the revenue. They’re going to provide revenue but they won’t provide actual unit sales. You won’t be able to tell independently whether or not they sold more or less based on those numbers long because everything’s kind of aggregated. They just make it harder to tell whether they sold more from one year to the next.
Rob: Yeah, and who knows? I mean, Amazon has done that with their Kindle and Apple’s doen that with different device categories that they just keep in in other devices like Apple TV. That’s one point they were not releasing any numbers for that. I think when something gets successful, they break it out. Not uncommon for them to do that but it definitely is interesting.
I feel this is a good prediction, actually. I just think unless Apple comes out with a breakthrough something in the next year or two, they are just incremental improvements on good technology—I like their hardware—but there’s been nothing groundbreaking that’s really capture the market, whereas Amazon continues to innovate and continues to just kind of have cool stuff.
I mean, you think about AWS, multi-billion dollar business, Amazon Alexa they’re way ahead of everyone else in terms of the smart home stuff. They’re just pushing things forward and I have become a fan of Amazon’s products. Even that Kindle Paperwhite, first one was super clunky and then they just get better and better. Amazon is certaining doing a good job executing. I think you’re going to be right on this one I guess is what I’m saying.
Mike: Yeah. Well you’re point on Apple just making incremental improvements, I still have an iPhone 6s+ I think—I see there 6+ or 6s+ I forget which—it’s several years old and I have no compelling reason to upgrade, like none whatsoever. My wife got one just because her old one was an iPhone 5. There were certain things that just would not run. She kind of needed to upgrade.
It kind of made sense, but I don’t see Apple coming out with anything. The watch was nice but it’s not a game changer for them in terms of revenue and with AWS, that’s the biggest cloud platform on the planet and only Microsoft is behind them with Azure. But that’s still a $40-$50 billion a year industry for them.
Rob: Yup, and there’s Google app engine as well. That would be the other one.
Mike: Yup, that’s number three. I’ve looked at an article here that says Amazon’s revenue, it says $44 billion for AWS, $19 billion for Azure and then $17 billion for Google. Yup. Crazy, crazy numbers.
Rob: Crazy. Well, sir, we should probably wrap this up.
Mike: Sounds good.
Rob: We will see how we do about 12 months from now. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 423 | Our Goals for 2019
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike set their goals for 2019 as well check in and rate how they did for their 2018 goals.
Items mentioned in this episode:
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. What of this week, sir?
Mike: Well, it’s the middle of December so I’m just kind of working on MicroConf sponsorships and scholarships at the moment. I was just having various conversations with people about different options with things that are a little bit different for a sponsorship option for MicroConf. There’s a few different options that are on there that also include the scholarships.
Last year we kind of quietly and under the radar offered 14 scholarships to people for Starter Edition. I’m looking to expand that this year and talking to various people about it. I’ve already got some people who’ve committed funds and already actually put the money in and started sponsoring those. That’s good to see and we’ll just kind of see where things shake out at the end of it. I kind of have a mental goal in mind but I don’t want to shoot myself in the foot by sharing it.
Rob: Sure and if someone was interested in either sponsoring either the conferences or offering a scholarship ticket to Starter, how do they get in touch with you?
Mike: They can reach me at mike@micropeneur.com or I think sponsors@microconf.com also works. Either one of those and if you’re interested in just sponsoring one individual scholarship option, there’s a link for that right on the sales page for the MicroConf Sales or you can go to microconf.com, click on the link to buy a ticket, and there’s an option there to just purchase an individual ticket. The terms of the sponsorships, there’s kind of a mechanism for purchasing more than just one or two tickets. I think it starts at four and goes up from there.
Rob: Yeah and I knew part of the scholarships. I mean, this is something you really spearheaded and you kind of came under the radar a couple of years ago, and then you really started pushing on this program last year. But it helps folks get to Starter who otherwise can’t afford to or they don’t have an expendable cash to get out there and it can really make a difference for someone. I know that we interviewed some folks with the kind of video interviews after the fact or during the conference to share with the person or company who would sponsor them. You and I looked through those and they were pretty meaningful and people were really impacted by the conference. I think it was a transformative experience for them. It’s nice to be able to offer something like that.
Mike: Yeah, definitely. What’s up with you this week?
Rob: Well, I’ve long had an LLC in California, obviously because that’s where I’ve been running my businesses and I just entered a process, I believe it’s going to get finalized this week, of transferring that LLC to Minnesota. There’s a bunch of reasons for doing this: (a) it’s cheaper to do business here, but (b) I had to have basically a kind of a PO Box or an accountant or whatever, you have to have an address in California that they could send stuff to. I don’t need to file tax returns in California anymore. Even just that, it’s like an extra tax return my accountant charges me several hundred bucks for.
It feels kind of a nice piece of closure for me and it’s also an opportunity to rename the thing because I can name it whatever I wanted. The name that I picked in 2007 does not resonate with me. I picked a name that was so broad and esoteric that I could put whatever I wanted under it. At first, it was like a consulting firm so it had the name ‘Group’ in it. It’s called The Numa Group. It was a consulting firm but then I just put a bunch of software products under it and put my part of MicroConf under it. I don’t particularly love the name anymore and the domain name I have for it is clunky. So I just kind of consolidate the thing. I renamed it to Start Small LLC.
Mike: Oh nice.
Rob: Yeah. It took me a while. I’m not good at naming stuff and I was like, “What is something that for me is timeless? That in 10 years, I’m going to think back and say that was a good call?” and it’s not just because it’s the title of my book, or part of the title but I just feel like it fits into so much. It tells my story in two words and it fits in with the MicroConf ethos. It just said so many things.
Anyway, that’s been kind of a fun, cathartic process of just moving everything here, like The Numa Group redirects to my robwalling.com site which I had redone. I’m just kind of getting rid of a bunch of cruft. The Numa Group site was a landing page that was outdated and I just kept saying, “Oh, I’m going to get back to that,” but why it even have a landing page? Why even have that anymore? The company is not important. Frankly, at this point, it’s kind of about robwalling.com and then about Tiny Seed. It’s my personal site and the business site and everything else in MicroConf, of course. Anyway, that’s kind of been the process.
Mike: Yeah, I can imagine that’s a real pain in the neck and it’s something you probably want to get taken cared of before December 31st because if you don’t, you’ll have a file taxes again in California the following year.
Rob: That’s exactly what I’m doing. The only other thing is I’ve been coming out of the woodwork a little more and doing some interviews and even wrote a Q&A piece for a software execute magazine. That will be out in a couple of months and I’ll probably mentioned that again when it comes out. Have you heard of Hacker Noon?
Mike: Yeah.
Rob: Dave, the guy emailed me from there and did a little-written interview with me. It was kinda fun. It took a lot of work. I forget how easy voice interviews are compared to written interviews. I know that you know this because of the Indie Hacker one you did last year or earlier this year and you’re like, “Yeah, I spent two days on it.” So much effort.
Mike: Yeah. It was way more effort to do those. I think people’s expectations are different as well if you’re talking versus if it’s written, it seems like it should be carefully crafted, say exactly what you mean, and not anything else. When people are listening to you, you have a lot more leeway, I think, because people understand that you’re talking off-the-cuff and it’s not heavily scripted thing when you’ve memorized ever question and every answer.
Rob: Yeah, that’s right, and it feels less prepared whereas writing, it feels like you need to rewrite it, reread it, edit it, and do all that, which is exactly what I did. It took me 2-3 hours to answer the questions. What was cool was some of the questions at Hacker Noon interview, ones that I’ve really never been asked, which is always fun to think through but it’s also time-consuming, and it’s peaked.
It’s kind of peaked productivity stuff. I had to do it in the morning. I couldn’t in the afternoon there. I would just been too tired to really hammer something out. Then I came back to revised it, updated it, and stuff. I feel like it turned into a really good interview. I haven’t done a written interview in probably five years just because of the time that it takes. I just turn them down. But I kind of wanted to do this one. We’ll be sure to link that up in the show notes.
This week, we are diving into our goals for 2019. But first, Mike, the walk of shame. We get to look back at our 2018 goals. Episode 372, just a short 50 or so, 51 episodes ago, it looks like. We talked about our 2018 goals. Why don’t you roll into your first one? Are we going to do a 1-5 scale of one we completely flubbed the goal and five is we completely nailed it?
Mike: Oh I figure we talking about 1-5 is like my goals versus your goals.
Rob: Oh, no. No, no. This is how well we carried them out.
Mike: Well, I’ve been quite honestly we could put one on pretty much every single one of mine. We could kind of shorten it. I’ll go through them but this last year was just absolutely atrocious.
Rob: Let’s do it. Let’s roll through all yours right now then.
Mike: Sure. You want me to go through all five of them then?
Rob: Oh yeah, the agony. Let’s read them in slow motion so everyone can watch a trainwreck.
Mike: The first one was actually a carry-over goal from the previous year, which was login at least 100 days of exercise the coming year, and I fell way, way short of that. I probably got to 25 or 30 and that was just about it. The second one was making Blue Tech profitable including my time, which has also not happened.
And then the other three, I think at least one or two of these, about two or three months in, maybe March or so we decided, “Hey, these just don’t even look realistic. We should just can these to begin with.” One of them was speaking at six plus conferences or events because the idea was that, at first I thought, “Okay, well this can be a way to market Blue Tech,” but at the same time, you really have to have the right audience for that kind of thing anyway, and it felt like more of a distraction than anything else. So, I ended up canning that one.
Then the other one, reading at least one business book every two weeks. That seem to me like it was also a distraction. It was like a consumption thing. I also cut back on podcast listening just because of the same thing. It will just take up mental overhead that I just didn’t want to have. Then the last one of that list was hiring someone to take over Blue Tech development, which kind of requires that Blue Tech become profitable. If that doesn’t happen then it’s hard to fund that. So yeah, I would say pretty much one on all of those.
Rob: What does that tell us? Is it were you doing other things that you would say were accomplishments that were outside of this? Was it a focus thing or was there a better priority that came up? Or do you think our goals are stupid? That’s another. Should we not set goals?
Mike: I think a lot of it had to do with lack of focus. By lack of focus, I don’t mean I’m working on one thing and then working on another. I mean literally lack of focus. Inability to focus. Because I wasn’t sleeping. I mean, I’ve been kind of suffering through this for the past several years, like I got on a CPAP machine a couple of months ago and that thing has been working fantastically. I’m actually sleeping now. But I went back and before this episode, I looked at the sleep blog that I’ve kept for this sleep therapist that I saw. I was up anywhere from 3-8 times a night and I was only getting anywhere from 4-6 hours of sleep. There were times when I would get 1½-2 hours of sleep a night so I felt fuzzy.
It’s hard to describe the difference that it may swing. I felt that way. Yesterday, for example, I woke up and I had a fantastic night of sleep. It’s a world of difference between being able to think straight and just kind of going through the motions and getting things done but not really able to focus on any one thing and feeling like you’re shifting back and forth but not making any real progress.
Rob: Yeah. It’s easy to get distracted and your thoughts are fleeting. In addition, I don’t know if this happens to everyone but when I only get a few hours sleep, I am actually super pessimistic and I tend to look like someone with depression. I don’t technically have it because it’s not over a long period of time. I will wake up and just be like, “Oh this is all just shit. None of this is going to work. Oh my gosh. Why am I even starting startups? I can’t do any of it.” That will be my inner self-talk and I’ll catch myself now and be like, “Dude, you’re really tired. You should just go to sleep.”
I know that’s not easy for you but that’s what my inner monologue will be on those days of like, “You’re going to be better off not working today.” But for you, it was happening everyday, right?
Mike: Yeah, even on the weekends, too. That was the worst part is, I was exhausted and I couldn’t get to sleep. When I did go to sleep, I didn’t realize also the time because I was trying all these different things to just get to sleep. Or I’ll move my bedtime back earlier and I’ll go to sleep, or try to go to bed at 10:00 or 10:30, turn off all electronics, don’t answer emails after 7:00 or 8:00 o’clock at night, just turn all that stuff off. It works to a slight degree but not enough and I couldn’t figure out why and it kept happening.
Of course, come to find out through the sleep study, like, “Oh, my body is waking me up multiple times a night because I stopped breathing.” You can’t change habits and fix that. It just doesn’t happen. It didn’t matter what I did. Nothing was working.
Rob: Yeah, and that’s tough and it’s frustrating. Obviously, five goal set and zero goals achieved. Health issues were a major impact on that. It’s interesting. Sherry talks about this, that a lot of mental health issues in general, like people with depression or ADHD or other stuff, one cause of those, not for everyone, but one cause is a lack of sleep. Once people stop being able to sleep full nights, their minds start doing weird things.
She also talks about there’s some research studies that talk about the quite a bit the angst of being a teenager, how you turn 13 and you get all angsty from 13 to 18 or whatever kind of the thing is in high school. A lot of that could very well be too just a lack of sleep. The kids at that age need about 10 or 11 hours and most kids do not get that much and they’re tired all the time and it leads to the sadness or whatever. I’m no expert on this, so I don’t want to talk, but Sherry has talked to me multiple times about this and especially with our kids, because a couple of our kids at different times, they have behavioral issues, they have focus issues, and one of the first things that we will get is sleep and exercise every time instead of trying to medicate or whatever.
I’m not anti-medication but it’s like the first two resorts every time Sherry is like, “How has he been sleeping?” and, “Is he getting out and getting 20 minutes of hustle, hard exercise?” Not a 20 minutes walk but 20 minutes of running around playing dodgeball a day. I think that it’s interesting and it can have a huge impact on your mood and your ability to focus, which then has a huge impact on your productivity.
Mike: Yeah. For me, it was that vicious cycle of not being able to sleep and then it also affects my ability to go to the gym. If I don’t go to the gym first thing in the morning, it’s just not going to happen because I get busy in other things getting in the way. Not being able to sleep has a direct impact on my willingness and ability to go to the gym. It just puts me in this vicious cycle where I don’t get to sleep, so I don’t go to the gym, so I don’t feel good in any way, shape, or form, and then I go to bed and I’m stressed out, exhausted, and tired. And then my mind is wandering even before I get to sleep so I can’t get to sleep. When I do sleep, my body just – I guess I’m assuming because it’s physical problems. I just got the sleep apnea that wakes me up.
All of it combined. It just doesn’t end and there is no way for me to kind of break the cycle until I found out what it really was. I knew I wasn’t sleeping but that was a symptom. It wasn’t the underlying problem.
Rob: And you have that machine for the past couple of months. Dude, how’s your progress? Has it been night and day? Not just how you feel because I know that you feel is night and day but are you making substantially more measurable progress since then?
Mike: Yes. I can point to different things that I’ve done in the past, like two months or so. In the past two months, I have probably made more progress than I have in the past 10 or 15. It is night and day but I’m cautiously optimistic about how things are going to turn out but obviously at this point, I feel it’s more about execution that anything else. But I still have to make sure that I crack down on those health issues and make sure that they don’t get in the way.
Now that I know what the problem is or problem was, then I can try to do things to address it. But before, I was trying all these different things because I didn’t know what was going to work or what wasn’t and how to get around it. I remember pushing off on the sleep study a while back for my doctor, and she’s like, “Have you ever thought about having this done?” and I was like, “Well, I have but I don’t really want to go through it and have nothing come out of it,” because last time I ended up going in, she recommended that I go for a blood work. She’s like, “Oh your platelet count’s low and let’s check this out.” I go and she referred me to this doctor, go through that, and then $400 worth of test later, the doctor tells me, “Well, you don’t have leukemia,” and I’m like, “I never thought I did. I don’t know why I’m here for that test.” It kind of pissed me off but what do you do? The doctor’s are really just trying to figure out what’s going on here and they do it by process of elimination.
Part of it’s maybe my own fault for not doing it sooner because she had recommended it in the past but at the same time, I didn’t really want to have that done just because I didn’t know how much it was going to cost. My insurance barely covered any of it. It cost me several thousand dollars for between the machine and the tests and everything else anyway.
Rob: In looking back on obviously these goals, you said five of them are ones. This is a weird question but is there something that you’d accomplished in 2018 that you feel good about, that if it had been a goal, it would be a five? Something of note? I don’t know how you even rank that. I’m just trying to dig in to figure out is there anything there?
Mike: Like was 2018 a complete loss or were things you actually proud of?
Rob: Kind of, yeah. I mean, I just kind of digging into it because this sucks and there’s gonna be someone listening to this who thinks, “Oh, Mike should’ve sucked it up, accomplish stuff anyway, and push forward,” and then there are the majority of people I’m guessing are going to be like, “Wow, that totally sucks. I hope that never happens to me. I hope I never feel that way.” And then there are going to be people who like, “I’ve been through that.”
Whether it’s sleep issue, whether it’s your neck and back hurting so much that you can only work two hours a day, which has happened to me, whether some people get vertigo really bad so they get super dizzy, some people get depression, they get ADHD, there are all these debilitating things. They can be physical, they can be mental, they can be whatever, but it happens to a good chunk of us. Maybe not for a whole year in us since you’re saying on and off for a couple of years but I just think there’s a lot to think about with that. In terms of staying healthy, I think it’s probably the big takeaway, perhaps.
Mike: Yeah. The two things that I can point to is, the first one is the accomplishment, the scholarship program that I got, going last year at MicroConf. I think that, that was a good start and this year’s trying to take it to the next level. We’ll see how that goes but it was more about experimenting and trying to figure out what’s going to work, what’s not, and help work with the sponsors, figure out what works for them as well. I think that we did well with that.
Rob: I would agree with that and you basically spearheaded that and put in a bunch of time. That was something that was a little mini startup within MicroConf and I’m glad you called that out because that was something you did that was really cool. I think something else you may not call this up but you kind of crushed it on sponsorships this year with both the conferences so I would call that as a win for you. It’s weird to put a goal in there of like, “I want to increase sponsorships by X, Y, and Z,” because it’s more relevant to us, it’s an internal thing, and I don’t know that it’s that interesting to folks outside, but it is something you put time into and had success with.
Mike: Yeah but even the sponsorships themselves, they help us make Starter Edition possible because we, too, subsidize Starter Edition out from Growth Edition to some extent, and we have to because it costs the same to run both of the conferences. The stuff that we do there has a direct impact on Started Edition, which has a direct impact on people who are getting started with entrepreneurship and softwares. I think that all ties together is like a general kind of goal or direction that we both kind of always as long as this podcast has been going. But yeah, it’s a good thing to call those out. But I don’t know as I would probably have put those in exclusively as goals.
The only other thing I would say is, and I wouldn’t even call this a goal again, but I’ve started getting out with a group of friends here once a week and actually having some social contact outside of my office. It’s weird to say that because I don’t have an office that I go to. I don’t have employees or people that I meet with on a regular basis. I barely have any contractors at this point. It’s really just me, working on most stuff.
Like my social contacts, outside of my house is extremely limited. One of the things that I was trying to do is figure out in terms of the mood and you kind of talked about, if you don’t get sleep, you kind of feel depressed and why am I working on this and things aren’t working and you’re very pessimistic. I felt like that for a very long time because I wasn’t getting sleep. One of the things I tried to do was say, “Okay, well what can I do to fight this?” and one of them was getting out and be more social with people. So I kind of established that, Dungeons and Dragons group, then meeting with them on a weekly basis. Honestly, it was quite helpful but even now after getting sleep, it’s even more helpful because it’s not just me looking forward to it every week but everybody else is as well.
Rob: That makes sense. So some good things did come out of 2018 is what you’re saying.
Mike: Yeah, some, but I don’t know. I’m hoping 2019 will be substantially better.
Rob: Yeah. Sounds like a rough year. Looking at my 2018 goals, looks like I had three of them. One was to be in fewer meetings under 10 hours a week. You and I laughed, chuckled about this a few months back because the reason I was into so much meetings is because I was at fast-growing startup that was growing from, I don’t know, it was 20 or 30 people and it went up to 60-70 by the time I was leaving and that just requires a bunch of meetings to keep everybody apprised of what’s going on and all that. I was running a big team and non-senior leadership and there’s just a lot of stuff required with that.
When I left Drip in April, basically my meetings went to zero. We did this in November or December of last year so I didn’t have knowledge I was going to be leaving in April but I did achieve this in a way that I probably didn’t expect. I think the way I wanted to achieve it or would have thought about in November-December was to stay at the job but just change it so I was in fewer meetings but it turns out that leaving the job also did the trick. Frankly, my life’s been better for it, being in fewer meetings, that is.
Mike: Yeah. Add in six plus months of zero meetings a week, it tends to bring that average put down pretty far.
Rob: Yeah, I know. I am so much more chill and just content taking time off like this is something I’ve never done and it’s worth it.
My next goal was three days of exercise each week and so fewer meetings, but I give myself a five, a few days of exercise, I’m going to give myself a four. I basically crushed this goal from January until it got cold. I crushed it during last winter and then all through summer I was out doing stuff, I was riding my bike. Everything was built into my day and I was doing it.
Then it was probably around October, just a couple of months ago, that it got cold. We started homeschooling one of our kids and Tiny Seed started picking up. But what I let go was exercise and it’s what I always do and it’s always my lowest priority. So I did it for maybe 9 or 10 months of the year and there were weeks where I had five days of exercise. Way more than I even need in my opinion. Healthy by nature just by genetics or whatever. Even getting in three days of 20 or 30 minutes pop is enough. Mostly achieved, and I think it’s something that I want to certainly get back on the wagon here and the next few weeks as winter continues to bare down on us.
My last goal for 2018 and this one’s interesting. Let me read this whole thing. To ship something in 2018. Not sure what it’s going to be, yet. But I’ve been laying low for 18 months, 2017 was supposed to be a rest year and it was a hard year. First part of 2018 is going to continue to be rest but I need to start shipping, either consistent blog posts, a book, a new podcast, a course, software, something, and what is that something like?
Mike: I assume that that would be Tiny Seed.
Rob: It is and in 2017 November, I had no idea that that’s what I’d be doing. It’s interesting that it’s like knowing yourself. I figured I was going to need to do something and then I actually frankly started working on a book after I left Drip in April. I did write maybe 12,000-13,000 words, which is about a quarter of a book, 20%-25% of worth from a book. I did do that and then I eventually just slowed down on it and lost some interest and decided I just didn’t want to force it. There’s also that that’s in play and could feasibly come out sometime.
That’s what I had and I don’t know with me if goals are self-fulfilling prophecies or I make goals that I secretly, way in the back of my subconscious, know that I will achieve or something. This one strikes me as weird, honestly, because I remember the mindset I had at the time and I genuinely had no idea what I was going to do. I just know that I needed to put something out into the world and that something obviously has become Tiny Seed.
Mike: I think that generally, your goals tend to be, I wouldn’t necessarily call them self-fulfilling prophecies but more along the lines of you have this inkling in your head and in your subconscious that you know what direction you want to go or need to go but you’re not quite sure how you’re going to get there, and during our goals episode you put something down that has kind of surfaced but you’re not always certain of the specifics. But by the end of the year, something has solidified or something has come about.
For example, your fewer meetings. You probably weren’t thinking, “Oh, I’m going to leave Leadpages,” but at the end of the day, that was one of the ways that that came about. Maybe that partly influenced your decision because you wanted to have fewer meetings. And then the same thing with shipping something. That kind of goes back to leaving Leadpages as well but Tiny Seed kind of came out of that. You knew in the back of your mind, “I want to do something, not sure what that looks like.” I think your goals on a yearly basis tend to reflect that.
Rob: Yeah. That’s good insight. I also feel like I’m pretty methodical and I kind of know when it’s push year and maybe a rest year. I don’t know. I haven’t had many rest years per se but I don’t know. As we started Drip, I knew 2013 the goal had to be launch it and grow it to X, and then 2014, 2015, and 2016 at the beginning of them, I did make revenue goals for the end of the year.
This is an interesting conversation, actually, because some people don’t like goals, or they don’t believe in them, or they say they’re not worthwhile, or they say that they don’t fit them, they’re like, “Oh, how can you possibly plan 12 months out?” Maybe that’s a personality thing but I have had set goals for myself frankly since back in high school with Running Track.
I had goals to hit certain times at certain by certain meets or to make the state meet or whatever, and that to me was a motivator to strive to do that. I had goals to write certain amounts of things and then when I started blogging and started becoming a professional, I had a goal to make this much money by the time I was this old. I don’t know. I’ve been a goal to reverse it so maybe these goals fit my personality and am not something that everyone necessarily needs.
What I find is interesting is my wife, Sherry’s personality is quite a bit different than mine. But when she goes on a retreat, she also sets at least some, I don’t know if she calls them goals, but there’s things that she’s striving to do and she looks ahead a year and says, what are some things that I want to get done? Now I would call those goals but maybe you could call them a mind map. You could call them something different but it still is something and it may not have an exact time frame, it may not be, I want to make exactly this much money from this thing but it’s like I know that I need to kind of do this.
That’s how we do these episodes. I think we should probably call that out. Do you feel the same way? Are you a goal-driven person and does having goals, you think it helps you? Or do you think it’s a waste of time, I guess, to have these?
Mike: I’m definitely driven by goals but I feel like the further out those goals are, it’s harder for me to really conceptualize the entire path getting there, and unless I sit down and kind of do all the planning work of saying, “This is what it’s gonna take to get here. This is what’s it’s going to take to get here.” Unless I kind of do that whole process, I’m probably less likely to reach the end goal because I don’t necessarily have a map to follow. Part of having that map to follow it’s fun for me to build that but once I figure out the answer to a particular problem, I am not always the best at following through and actually implementing it.
That’s more of a personality thing than anything else but I can definitely buckle down and get things done, but it depends on kind of what is and what my interest level is. If there is a goal that I put down and I know exactly how to get there, if the hardest part is figuring out how to get there, then I probably weight less likely to actually do it.
Rob: Yeah. That makes sense and I think, to be honest, there were times when, I think back seven, eight, nine years ago for me, it was really hard to look ahead a year because I just didn’t know. These were years where I decided to write a book and wrote it in three months. There was no inclination that I was going to write a book that year. I just decided this is a new thing and I’m going to move on to it. We decided to launch MicroConf into that pretty quick and launched a podcast.
Those years, I think, if I had goals that I wrote down, probably completely went off the rails. But I was okay with that. There was a lot of stuff in flux in terms of my professional career and I was trying to figure stuff out and it’s not like I nailed these goals to my door and I could only do them when I etched them in cement and I could not veer from them. I veered from them because it was a better decision at the time.
What I find with goals I set now like we’re going to talk about in these episodes, these are a way for me to focus because I think most of us are presented with way more opportunities than we could possibly pursue and way more “good” ideas than we could ever implement, some of them good, some not. Having goals is at least some bumpers to keep me in a lane so that I don’t look around at every email I get offering for me to do this thing or this opportunity or whatever, and say, “Oh, of course that sounds like fun. I should do that.” But I come back to these goals and say, “Yeah, these are things that I really wanted to do and they made sense when I really thought about them,” and unless something amazing comes along that just blows my mind, I’m going to kind of stay on this track for this year and see things through.
I think that not having goals can lead to a shorter term perspective because again, shiny object syndrome. Opportunities come up so frequently that can be just derail you and you can get to the end of the year and be like, “What did I do the last 12 months?”
Mike: Yeah. It’s giving yourself permission to say no to things. There’s that idea that unless it’s a “Hell, yes,” it should be a no. But you’re right. There’s just so many things that we could do. It’s more about what do you want to do if you had all the time and resources in the world? But you only have so much time see in your lifetime to do anything.
It’s hard to figure out for each individual, I think. If you’ve got this unlimited list of options, what is it that you want to achieve? What are you going to be proud of? Eventually, you’re going to be gone and what do you have left behind?
Rob: Yeah. It’s an interesting thing to think about. It’s like a legacy. If you look at legacy and say, “All right. Mike, in 20 years, you and I will be in our 60s. We could still work, we’re still going to do stuff. But are our best days of accomplishment behind us?” This is a rhetorical question. We don’t have time to answer it here but do you have goals? Or a goal of when you look back, when you’re in your 60s or 70s, would you want to think, “Yeah, I did that.”
I think each of us should if we don’t. And how are we going to get there if we haven’t set some goals along the way? Do we just kind of wander our way and make it and in the end we’re like, “Hey, I’m glad all of that worked out.” Or does it have to be a deliberate decision every week, month, year to kind of make progress towards something bigger?
Mike: Yeah, but I don’t think you’ve always know what that’s going to be 20 years in advance. I mean, it’s hard to know what’s going to work and what’s not as you’re moving forward, and some things you’re going to do and be very proud of them. But in the grand scheme of things, they may be meaningless to, I will say, the greater world but to you, they meant something.
I think looking back, you’re going to want to have those things that meant something to you and yes, it would be really nice to have legacy where other people recognize the accomplishments that you’ve had. But at the end of the day, did you live the life that you’ve wanted to live?
Rob: That’s almost a great way to end this episode except for we haven’t covered our 2019 goals yet.
Mike: Damn you.
Rob: I know. I’m glad we talked to that through because I think the whole goals conversation is kind of been on my mind recently or every year or so, it just comes on my radar of why do we set these and what does all these mean? Maybe a separate episode we talk about legacy but for now, shall we dive into 2019 goals? Looks like you have two of them with multiple sub-parts. It’s like a tax. You’re like you’re an IRS document. One part D is, yeah. You let this roll into it.
Mike: All right. The two goals that I have for 2019, the first one is really just get my health back on track. With goals you really want to have some sort of definition around exactly what that goal means, so for me it means basically four different things. One of them is exercising, the second one is getting a regular sleep schedule going, and then the third one is losing some weight because I’ve put on probably about 25-30 pounds or so in the past couple of years, and it’s more because just lack of sleep and everything else is going into it.
Then the fourth one is regular in-person social contact, which I’ve got partially down at this point, I think, but think I probably need to expand that a little bit. Exercise a certain number of times a week. I wanted to get to it at least twice a week, and then the normal sleep schedule, I really need to be getting at least 6½-7 hours of sleep every night. Previously it was only maybe 4-5 on average, I think. Then obviously losing weight. I’d say 15 pounds to kind of start with for this coming year. Then regular in-person social contract. It’s kind of a nebulous thing, but I’ve got at least one scheduled night a week with people. Maybe I’ll go to two, but I’m not sure about that.
Rob: Yeah, that one’s tough because I don’t know that you want to commit yourself to two nights a week. It doesn’t necessarily always makes sense.
Mike: No, but I do notice that when I go to my gaming group and I come back, I tend to get a really good night of sleep that night every single time.
Rob: Interesting. Is it because you drink a lot?
Mike: I plead the fifth. It’s when I host, I don’t have to drive anywhere so that’s certainly helpful.
Rob: Less drinking disturbs your sleep, right?
Mike: Yeah, it does.
Rob: It helps you fall asleep but it doesn’t actually give you a good night sleep.
Mike: That’s true. Those are kind of the four subheadings under that first goal.
Rob: That makes sense. Let me do my first one. My first one, not surprisingly, is three days of exercise per week. It’s basically a continuation of something that I started a couple years ago, although I believe you started a whole exercise goal first, probably 3-4 years ago and eventually I was, “All right, I need to get on this.” It’s never something I’ve needed to do but I know it’s something I should do in all honesty, especially as I get older.
It’s kind of a boring goal, but it’s something that I need to have on my list or else I have no desire to do it and I will not make the time. Unless it’s written down and I know that I’m going to have to come back here and talk about it, it’s an interesting accountability thing. It’s not that I’d be terribly devastated if I came back and say, “Oh, I got a one.” I know it’s good for me, like eating my vegetables and I know that I will at least made some type of public commitment to it. For me, it’s helpful to say this as a goal.
My second goal is for Einar and I to build it into essentially the de facto brand when bootstrap has look for early-stage funding. This one is going to be tough to measure and this is where the 1-5 will help us out because I think by the end of 2019 frankly, that’s only 12 months away and it’s not a lot of time to do this.
I’m guessing this is this is a multi-year process. What I’m saying here is, I want to raise all the fund, kind of close the funding and have a batch that goes live. We get companies, they’re having success, and it’s just executing on the Tiny Seed vision. I don’t know exactly what to put to measure at the end of 12 months, but I have a feeling in my head of what I want it to be and I want it to feel successful. I want it to feel like it’s well-regarded and I want it to do right by both the founders and the investors who were involved with it. I want it to make a difference.
I feel like if we had said at the beginning of starting MicroConf, that the end of next year or the year after, we want it to be a prominent player in the conference space, which was not a foregone conclusion when we launched it by any stretch. That did happen. It didn’t probably happen in the first year. It took us a couple of years to get there but we knew it when we saw it. Once it happened, it was like, “Oh yeah. MicroConf is a thing now.”
That’s how I want. I want Tiny Seed to be a thing. That’s my long way of saying 2019 for me is definitely the year of Tiny Seed.
Mike: Yeah. I think for this one, I agree that for the way you kind of phrased it here is for it to be the de facto brand when bootstrappers are looking for early-stage funding. That is in and of itself as kind of a multi-year goal, but I think you could probably narrow that down a little bit to say you’ve got the first batch of people going through, however big that batch happen to be. Maybe you put goals around it, maybe you don’t, but at the end of the year, I think that you want to see that whoever has gone through that batch, has a reasonable looking chances for success based on where they started.
The exact definition of that is not going to be determinable right now, but you’re going to kind of know it when you see it six, eight, ten months afterwards. Maybe they’re at that point by the end of the year, maybe they’re not. It depends on kind of when you start that batch and get them started through the process, because if you start in January, then obviously you’ve got a lot more time than if you started in next October.
Rob: Yup. I made a note there, first batch of founders are in the batch and they have a good chance of success. I mean, in the back of my head, I really want this stuff to start moving in Q1, which is January, February, March, so we’ll see how close we can align to that, but it should give us a good chunk of the year to get people moving.
Mike: My second goal I have here on the list is specifically related to Blue Tech. First one is just getting my health back on track and then the second one is to establish some sort of traction for it or move on to something else. Maybe that sounds like a major shift, but at the same time I feel like with the focus starting to coming back to me and clarity and getting sleep, things need to move in a good direction or it’s just going to be meandering. If it’s still meandering at the end of next year, then chances are good that either I’m not committed to it or there’s something else going on.
Quite frankly, I just don’t want to be in a position where I’m making excuses at the end of next year. It’s got to move or not. If not, then fine. I don’t want that to happen but at the same time, as I said, I just don’t want to be in this position next year where I have to justify kind of what happened.
Rob: Yeah, I think that makes a lot of sense. I think it will be a tough decision. A lot of work easier to try to push it forward and then evaluate that.
Mike: Yeah. I don’t know exactly what the target is for that. I’m kind of fuzzy on what it means. Is it a revenue target? Is it customer base if I get to X-1 customers I plan to get to X? Do I kill things? I don’t think that’s really applicable. Did things shift substantially now that I feel like I’m able to focus or am I still in that position? Do I still feel like I’m not able to focus on it? If that’s the case then made it’s a motivation issue and maybe I’m just not really interested in it. But we’ll see.
Rob: Yeah. I feel like in my head it would be finding product-market fit. Having a product with that really is easy to grow because turn is so low and when people start using it, they stay and that you’re able to add enough customers that, like you said, it becomes profitable including your time, or it’s very close to that. It’s on a trajectory to hit that within a short amount of time, I guess. That’s all still amorphous but that’s what I think in my head it probably looks like.
Mike: Yeah, but that’s what I said, establish some sort of traction with it like the MU site trajectory and I think that’s exactly the same thing. Does it to appear to be on the right path, and you may not know exactly what that is right now but afterwards, you kind of know whether there’s a good difference between where it’s sat now versus where it is at that time.
Rob: Yeah. My last two goals. Again, my first one is three days of exercise a week, second one was about Tiny Seed, and my third one is do not panic when the stock market crashes. This is one of our predictions that we have every year. There’s going to be this correction or whatever.
Mike: Did you panic last week or the week before when the stock market dropped like 1000 points in a week?
Rob: Nah. I didn’t at all. No.
Mike: Okay.
Rob: Maybe this is an easy one. I mean, I kind of pay attention to it but I’m also so diversified and I don’t have so much in stocks that it matters. I don’t know. Maybe I’m just not going to panic. Maybe this is not a big one for me. But I’ve just been thinking about it. In 2008 when it all went down, I sold stock after it had gone down and it’s a complete rookie mistake that everyone makes. The reason that the mainstream investor, the reason that their returns don’t match a simple index fund is because people do that and they panic.
I’m in a way different mental position and a way different financial position this time. My hope is that no matter how bad it gets, I’m just kind of like, “Yeah, whatever. I don’t need to sell stock this point, to do anything and that that I’m able to just ride this out.” That’s how you’re going to do it. So I’m at the bottom is certainly not going to do it for you.
My last goal for 2019 is one that I want to do, I hope to do, but it will be the first to go if all of my focus is required to do what we need with Tiny Seed. This fourth goal is to either write or rewrite a book. By write I mean finish and publish, get something live. I continue to get feedback in a positive way.
There was a Hacker News thread when we announced Tiny Seed in October that went pretty bad. It was on the homepage for a day or something and it was crazy. Got a bunch of good conversation and comments around that. Part of that was like, “Hey, this is from the guy who wrote Start Small, Stay Small,” and someone like “Oh that would be great if we rewrote that,” something like that. That single heat, if he updated it for a second edition. That comment got upvoted 26 times or something and most comments get a couple upvotes. Then I chimed in like, “No, this is actually good feedback for me.” I know I hear this now and again but it is something that sold enough copies and that the mental or the high-level things in it are still applicable but kind of the tactics and a lot of the boots on the ground stuff has changed since 2010, in the last eight years.
It makes me really think about going back to that manuscript. I do have a different take, and I do have so much better examples, and I do have entire topics that I talk about now that are just not in a box. That would it be a lot less work to rewrite or not even rewrite. It’s like update, a second edition, basically, and expanded.
I think I would like to get that done and the nice part is it’s not a side thing or it’s like, “Oh, I need to steal time away from Tiny Seed.” It could be in service of that because a launch of another book and getting that into the hands of a bunch of new entrepreneurs or even founders who have read the old one, it continues to promote the idea of bootstrapping. It continues to push behind my brand and my brand is obviously attached to the Tiny Seed brand. I think it could be in service of my other goal, which is to grow Tiny Seed in prominence and respect.
Mike: There’s ways to cheat here a little bit was for me to take your old conference talks and have them transcribed and then put those in the book.
Rob: That’s a great idea. Obviously, it wouldn’t be just transcriptions. I would want to clean it up and stuff. There’s still some content in the Micropreneur Academy that I think never saw the light of day outside of the academy that I think could be modified and updated. Not like nuts and bolts, here’s how, and what to click in the Facebook interface but there’s still some kind of philosophical and high-level stuff that’s in there that I wrote. I can see that being a tractor that I didn’t put in the first one because either it wasn’t relevant or just cause I didn’t.
That’s the thing is to your point, there’s been so much content that we’ve kicked out on the podcast conference talks or through other means. Even that when I started writing the Drip book, the book I’m sort of writing this year, where I was kind of writing the story of Drip but then I started realizing there were these takeaways and there were mistakes and there were things I did right. Those are kind of essay right now and I could pull pieces of those into it. I think you and I get together every week and we talk for 30-40 minutes. We generate a lot of content that could be pulled from.
Mike: Yeah, for sure. I think we are about out of time for the goal episode. It went quite a bit longer than I had expected but good things, good takeaways for you?
Rob: Yeah, I think so. It was a good discussion and can kind of going to get these solidified. We’ll see. We should check-in in three or four months and see where we are.
Mike: Cool. Well, I think that wraps us up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening, we’ll see you next time.
Episode 422 | Impact of GDPR on Mailing Lists, Keyword Stuffing, Shady Competition, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including the impact of GDPR, pruning e-mail lists, TinySeed and more.
Items mentioned in this epiosode:
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. How did you like my announcer voice today?
Mike: It was great. It was very…
Rob: I was working on it.
Mike: Are you taking voice acting classes so you can announce movies and stuff?
Rob: A voice-over guy? I could be more annoying with it. I was trying not to sound like a radio DJ. What’s the word this week, man? What are you doing?
Mike: It occurred to me that last week you were giving me crap for forgetting the intro. I will remind you of the time in MicroConf Europe, we were on stage, you completely spaced on the intro.
Rob: I did, actually, and I can’t remember anything. That’s right.
Mike: It’s not just me. We’re both getting old.
Rob: Indeed.
Mike: Or not just you.
Rob: A couple of weeks back in episode 420 when Einar and I recorded it, we got on the mic, we recorded it, and after I hit stop he said, “Do you guys do one of these every week?” It’s super funny. I said, “Yeah, but it’s easier blah-blah-blah,” and I couldn’t tell if he was just saying, “What a slog this was.” It was just a funny question and I was like, “Well yeah, we do it every week. For the last four hundred 420 weeks we have done one every week.” It was just a realization. I don’t know. I think it may have taken a lot of energy or a lot of thought for him to kind of be there, to be on a podcast, for not used to doing it all the time, it can feel exhausting. Remember the first 20 or 30 of these? How hard they were? I would go take a nap after we record it because I was so stressed and so anxious and nervous and not knowing what to say.
Mike: For the four listeners that we had at the time.
Rob: Yup and then eventually that all goes away. That leaning into hard things and then doing things that scare you and getting better at them.
Mike: Yeah. I don’t know. I don’t really have a problem with just getting on and talking at this point. I’m not self-conscious about it but I also don’t think that there’s 300 or 3000 people staring at me while I talk.
Rob: Right. It’s definitely different than being up on stage. How about you? What’s going on this week?
Mike: Well, I got into a couple of extremely angry emails from people who are unsubscribing from a couple of my newsletters. I’ve gotten two separate ‘F off’ emails this week, so I think I’m doing something right.
Rob: Why do you think that is?
Mike: Well, one person I think—
Rob: You probably…
Mike: I think I have explanations for both of them. One of them, he said he unsubscribed three times. I looked and there was only one unsubscribe there. Either it just wasn’t working or he wasn’t actually unsubscribing but he thought he was. The way it’s set up is it takes you over to the unsubscribe page so you can manage your subscriptions but just clicking the link isn’t like a one-click unsubscribe. My suspicion is he didn’t actually do it right.
Rob: And there’s a big red button on that page that says, “It says you have not been unsubscribed,” and there’s a big red button that says, “Unsubscribe from all,” and you have to click that. Just so you know, there is a setting in Drip, you don’t need to do it but you could flip it so that the moment they click that one link in their email, it unsubscribes them from everything. We’d had people who want to do both ways which is why there is a setting. And I say we, I don’t work there anymore. But when we built it, I really tough time with that, dude. I still say ‘we’ all the time about Drip and it’s like, “How is it technically ‘we’ anymore if I’m not there?”
Mike: Usually, the way that I talk about it is, if it’s something that I want to “claim” responsibility for but somebody else is going to do it, it’s ‘we’ as in ‘those people. I totally understand that but I don’t know what the whole deal was there. And then the other one I’m still tracking it down. It looks like I got bad data in terms of the name and apparently he was extremely upset that I said the wrong name in the email. But the way I got it was that, so call them a completely different name.
Rob: Yeah, that’s weird. I mean, that’s the thing. You can’t please everybody and you get one or two of these out of thousands. Some people are just jerks or idiots or had a bad day. There’s a lot of bunch of different explanations for it.
Mike: Yeah, I’m not worried about it.
Rob: You bring up more to laugh about it than anything.
Mike: Yup.
Rob: You must be doing something right. We have some new iTunes reviews. We’ve got one in October from Will and he said, “Both inspirational and actionable. Most entrepreneurial podcast fall either in the inspirational bucket or the actionable bucket, but rarely is a podcast both. Startups For The Rest Of Us is an exception to this.” We’ve got another review from Greech Jay. Man, his mom must’ve not liked him, Greech Jay? “Top notch,” it says, “Wow. Clearly brilliant and useful info. Huge value.” You think Greech Jay is just an online handle? Or do you think I’m mispronouncing it and it’s Greech or something like that?
Mike: No idea.
Rob: No idea, don’t care, huh? But thanks for the amazing reviews.
Mike: I didn’t say that I didn’t care. I just have no idea. I don’t have it in front of me. I can’t see how it’s spelt.
Rob: Are you eating something while we are recording?
Mike: No.
Rob: Yes, you totally are. This is great. Ladies and gentlemen, Startups For The Rest—
Mike: …noon, so what do you want me to do?
Rob: That’s true, you’re starving. So, thanks for the iTunes reviews. If you have not left us a five-star review, I promise I will not make fun of your name and I will not say that Mike doesn’t care about you because I know that he cares about each and every listener. It would be great if you could log into the clunky iTunes interface, click the five star and leave us a sentence about, “Hey, these guys say things every week. Say something factual.” Even if you don’t like us, put five stars and be like, “Yeah, these guys really show every week.” That’s a thing, right? Five-star worthy.
Mike: I think the best five-star worthy, like you’re just showing up every single week for eight years. We’re going up on nine at this point, so that’s a lot of time, that’s dedication.
Rob: Yeah, stupidity.
Mike: And sandwiches.
Rob: There you go. We’re going to answer listener questions today. Our mailbag is full once again, which is nice. As usual, the voicemails went to the top of the stack. We’re going to start with a voice mail at the impact of GDPR on the value of mailing lists.
Paul: Hello, Mike. Hello, Rob. My name is Paul from Melbourne, Australia. Thanks for taking my question. You both espouse the value of developing and curating mailing lists. But I recently read an article from LeadPages, stating that, and I quote, “A required checkbox does not allow for freely given consent under the GDPR law. Therefore, it should be optional for a subscriber to consent to receiving marketing emails from you in order to receive a lead magnet, freebie, pay product, et cetera.” What do you think this means for the building of mailing lists going forward? And does this affect your view of the value of mailing lists in relation to the likely increase and effort required to develop enough traffic to make up for the loss of email signups due to this optionality? Thanks again and have a great day.
Rob: Thanks for the question, Paul. I appreciate that. I think you might be misunderstanding something. I just want to clarify that, “A required checkbox does not allow for freely given consent under the GDPR law.” That’s the quote you have and what that means is, if you force them to have the checkbox checked in order to proceed, you have not given them optionality. What that means is it needs to be an option when they submit your email for them. They put in their email, maybe their first name. But there is a checkbox there, I believe it has to be unchecked by default. That’s my understanding, not a lawyer, not a GDPR expert, but I believe it has to be unchecked by default, and you can’t force them to check it to submit the form. Does that makes sense? They should be able to submit that form. It doesn’t make any sense to me, but that’s how my understanding of the law is. If they check it and they submit it, then they have consented and now you can email them. If they don’t check it and submit it, then you need to figure out what to do with that customer because they have not consented to hear from you.
What they built in Drip—hey I just said ‘they’ finally—they’re kind of building it as I was leaving but I think they did a really elegant implementation and if that check, you can just add a GDPR checkbox. It’s a strongly-typed item in Drip’s settings and when you add it, if someone submits without that checkbox being checked, then they have a property on the subscriber that says, “GDPR permission given or something,” and that is either set to true, false, or unknown, and unknown is if they were added through other means, through an API or an import or maybe they were added before you enabled it or whatever.
But again, if they do check it and submit it, then it’s true and if they don’t, then it’s false. You as a Drip customer could just have a workflow or rule that says, “Anyone who’s added with it false, unsubscribe them from all, delete them, do something to get them out of your system.” Or you could keep them in your system, in the Drip account—I’m not sure why you would do that—and just make sure that when you send out an email to everybody that you exclude those subscribers from the segment.
Those are nuts and bolts that I’ll cover before. This question is not about that. It’s more about how do we think this is going to impact it but I kind of wanted to clarify that. I’m using Drip as an example because I know intimately the implementation. I think it’s a good one. I’m pretty sure MailChimp and ActiveCampaign and Infusionsoft have all done similar kind of related implementations.
Now, over to you, he actually had a question. What do you think this means for building of mailing list going forward?
Mike: I don’t think that it changes a whole lot in terms of building a mailing list but I do think it probably has an impact on what you do with it once you have those email addresses because you’re going to have to make a decision about whether or not you’re going to send them email or not. If they’re submitting it and they haven’t provided consent or anything like that, do you still email them anyway?
Rob: Isn’t it illegal if they’re in the EU? I mean, you’re breaking EU law if you do that, right?
Mike: Yeah, you are, or at least I believe that you are. The question is, do you care? I’m not saying that you should or should not, I’m not a lawyer here, you’ve got to make your own decisions here but at the same time, if they’re submitting that, what’s the instance your company want to take on this? Do you want to be hardline? You […] comfortably comply with GDPR and were going to take that extremely seriously and we won’t email you unless you click the check box? If you do that, it’s like organ donor cards. Whatever the default is, that’s what most people are going to tend to.
Me, I probably wouldn’t check it because I’ll be like, “Okay, it doesn’t apply to me. I’m not in the EU so I don’t have to click this checkbox and it doesn’t matter. I’ll just click and submit.” But does that mean that you shouldn’t send an email to me? And the answer would be, “No, because I live in the US. It’s not applicable.” But you as a marketer have to decide where does this person come in from? Can you figure that out technologically? And even if you can, where do they receive their email? Where are they actually based? Are they using a VPN? You don’t know any of that stuff.
I feel there’s still going to be some things that come down the line where some of these things are going to change a little bit, maybe GDPR is going to be modified to say that, “If you don’t get consent upfront, you can turn around and send them an email to ask for it,” and if you don’t get it then, okay fine. But that’s not really any different than double opt-in at that point.
I feel that with any laws that are written, inevitably they are never written by people who are technical enough to understand what they’re trying to implement. That kind of stuff is going to happen. Because this was the first pass of GDPR, expect there’s going to be many changes. I would hope that that’s one of them but I don’t know. Ultimately, it blows down to what is your risk tolerance moving forward with your company and how likely do you think you are to be brought to court for over something like that?
Rob: Yup, that’s it. There is a setting in many of the ESPs, and Drip is one as well, where you can show this checkbox but then there’s a setting, this is where I feel again, Drip point the extra mile. There’s a checkbox that you can check in your Drip console to only show the GDPR checkbox on your forms if client’s browser registers to the EU, meaning, it’s doing IP lookups, I’m assuming that’s what it’s doing and geolocating them.
You and I know as technologists that, that’s not 100% foolproof. Just like you said, maybe they’re on a trip, maybe they’re on a VPN, maybe whatever. There’s a bunch of ways that that could be spoofed or incorrect or whatever. But here’s the question. If GDPR or if the EU actually came after you, your little, small business which I just don’t think that they’re going to do and you said, “Look, we implemented all this stuff. (a) Are the auditors going to even be smart enough to realize that there’s this setting, they’re not smart enough is not the right thing but technical enough to understand it, and (b) if you say, “Look, I did this. I did the best I could.”
This is the kind of stuff that is such a gray area that I think fretting about it is, I don’t know. I think it’s been given a lot of wasted thought to GDPR that I think could have been spent doing productive things, I think is my opinion. Like you’re saying, it’s risk tolerance. It’s much like filing your taxes. You can go super conservative and you can go super liberal with your taxes. If you go liberal and liberally interpret things, yes, if you get audited, you may run the risk.
It depends on the auditor because it’s not black-and-white. As much as we want all these things to be black-and-white, they’re not. They’re shades of gray and there’s levels of interpretation and there’s precedents that’s here but not there. It’s kind of a tough thing because you have to make a judgment call on it but I don’t think that GDPR is going to really impact the ability to build email lists.
Kind of like what you said. Everyone kind of shrugs their shoulders. If I see the checkbox, I check it. Maybe it’s going to be really hard for B2C. Let’s say you are Verizon or some selling to consumers. They’re the ones that are gonna accidentally forget to check some checkbox and that you’re then going to miss out of half of your people. I think the more tech-savvy people that we deal with, they’re going to know it, they’re going to eyeroll, and they’re going to check the box when they need to.
Mike: You brought up taxes. That was actually the direction I was going to go in as well and mention that because I think if you’re filing your taxes, chances are really good that you’ve prolly violated the law in some way, shape, or form and can be theoretically be nailed to the wall. At that point when you are audited, it comes down to intent. Were you actively trying to evade the law or did you make a mistake?
If you make mistakes, technically ignorance is not a viable defense in the courts but at the same time, these government agencies realize that you got a lot of things going on and some things are going to slip through the cracks, mistakes that could be made. It’s not that big a deal. It’s not a criminal offense, so it doesn’t matter. If you are actively doing things that are trying to circumvent or subvert but the intent of their legislations or regulations, yeah, they’ll nail you to the wall and that’s what it comes down to.
Rob: Yeah. It’s the difference between a mistake and fraud. Fraud, they prosecute you for it, put you in jail, and the fines are tremendous, if you did it on purpose. If they think it’s an accidental miscalculation, that happens. They will still sometimes have leniency and sometimes they’ll do a penalty or they’ll certainly go back and say, “Well, you didn’t pay us 10 grand and then we’re going to add $1000 penalty, but still, it is 10 grand that you owed them anyway. I don’t know.
Mike: But this discussion is really why entrepreneurs hate legislations where people are making rules about stuff they don’t understand. It’s just like, “Please go away and let us do our thing.” I get why they’re trying to do it, I get the intent, and maybe it really does work that way in reverse. I’ve never had my business brought to the courts for stuff like that, and hopefully it will never happen, but I feel they take intent into account when they look at that stuff.
Rob: I’ll say it again, it’s my soapbox. This is my charge more. Patrick Pence has charged more, I have. GDPR should have excluded small businesses. In the US, there’s this lobby that excludes small businesses from tough regulations that will be hard for them to live up to. Typically, if it’s 25 employees or less, or 50 employees or less, there’s some number where you’re exempt from a lot of things because they know they put undue pressure on. GDPR, I believe, should have done that.
Mike: That’s 50 employees, I think, for most things.
Rob: Cool. That was a good question, Paul, thanks. Our next question is another voicemail. It’s actually a question about Tiny Seed, based on episode 420 from a couple of weeks ago.
Mike: Can I answer this one?
Rob: You get to answer this one.
Chris: Hi. My name is Chris and I’m from San Antonio. I have a question for Rob and Einar about Tiny Seed. I wanted to ask you about managing risk for both you the investors and the founders being invested in since obviously, both sides are assuming risk in such an investment. It seems to me that with your business model, where you invest in companies that already have some traction, that the biggest risk is instead of outright failure like a VC-backed company might have where they just run out of money, instead the biggest risk might just be mediocre growth, where the question of whether you keep investing or if you need to bail out or not, isn’t really black-and-white.
If you agree with that premise, I’m curious about what you think about the risk for the founder, rather than for the investors? Assuming you want the founder to work full-time in the product that’s being invested in, at what point are the founders allowed to explore other options if […] who wants out and do not really making enough to have a living salary like if they have a family? Are they allowed to freelance? Will they be expected for that freelance income to go into the company being invested in so you get a piece of that revenue? Or does the relationship simply end to that point? And even looking out past that runway, if the founder’s company is floundering two or three years later, what’s the responsibility that the founder has to you?
In other words, success is obviously a good problem to have for these companies that are investing in, but I’m really curious about the different ways that the companies or that the investment may fail, especially if it’s not a very black-and-white failure scenario. Thanks.
Rob: So, what do you think about this, Mike?
Mike: You could probably just confirm these for me.
Rob: Cool.
Mike: My inclination is to believe that obviously, there’s the ones that do well and those are successful. There’s the ones that burn out and they are shut down and close out. Neither are those are you really worried about. It’s the ones that are floundering for, I’ll say, extended periods of time. I think in those cases, not just Tiny Seed Fund but funds in general, are just going to say like, “Okay, well, we put money into it. It didn’t really go anywhere.” And until the business is legally shut down, it doesn’t make any difference because nothing changes. The investors do not have enough equity in the business to make any business decisions or force anything to happen. It’s kind of out of their hands, so why worry about it?
Until the business is shut down because when the business is legally shut down and the entity goes away, there’s probably close out conditions or things that are in the paperwork that say, “X, Y, and Z is going to happen,” but beyond that it kind of doesn’t matter. If it’s floundering that badly, their time is probably better spent working on the dozens or hundreds of other startups that were invested in, where some of them are being successful, and they’re going to take away the focus from those to put it on something that’s floundering, versus spending that time with a business that is doing well and could be doing substantially better by focusing on it, you’re basically going down the wrong path as an investor.
Rob: Yeah. I don’t think that’s a bad sentiment. To be honest, I have not thought about this, I’m glad he’s sending the voicemail so it’s totally off-the-cuff. I have not discuss this with Einar but what do most funds do? They do basically what you’ve said and there’s a reason for that. If the business is floundering and the founder wants to shut it down, then you let him shut it down. If they don’t want to shut it down and they want to keep it, I have an angel investment where the founder just took a full-time job to keep this startup alive. He’s taking some of his money and pumping it in there because he still believes it still has merit and he still thinks he can grow it, that it kind of hit product market fit now. What “responsibility” does he have to me or to the investors?
I mean, he has a responsibility to do his best but honestly, if he has said, “Look, I’m going to sell this for parts,” or if he said, “I just can’t do it anymore and it’s totally floundering and I’m going to shut it down,” then he should do that. I would honestly want to have heart-to-heart with him before that, like, “Is this really which wanted do you have built this to a certain point?” I mean, that’s the thing is, unless the relationship goes south, which most don’t, the investor-founder relationship.
I’m in touch with every founder I’ve ever invested in, our relationships are good. If they just told me honestly, like, “This sucks. I’m out,” and they don’t burn it to the ground and they don’t screw anybody, but they’re like, “Look, this isn’t growing. We’re going to have to shut it down,” it’s like, “Okay, it’s an angel investment.” That’s what I thought it might go to zero. The odds are decent that it’s going to go to zero.
I guess all I’m saying is, it’s kind of the same way that most investments are. Some founders will feel like they have more work to do on their product even if it hasn’t hit traction yet, and would I encourage a founder to go freelance and then try to keep a business alive that wasn’t working? If it’s not working, probably not, but it tends to be that weird gray area where it’s not working but the founder thinks it’s going to work in the next couple of months. They have this deal that’s going to close or they have this feature that’s going to go live or they have something game-changing, and In that case, I would just talk like each situation is going to be different, I guess is what I’m saying.
So it’s going to be hard to make a blank statement about what you’re going to do and allow or not allow. I don’t feel I’m going to not allow much. This is all seat-of-the-pants. “Building startups is building the parachute as you jump out of the plane on your way down,” as Reid Hoffman says, so each of these things is like, “Well, let’s have a conversation. What’s the actual situation here? And then, let’s troubleshoot this like smart people who gets things done.” Thanks for the question. I appreciate it.
Out next question is about iTunes keyword stuffing. Actually, it isn’t a question. It’s a statement. It’s from Chris Christiansen. He says, “In your last podcast, you made a comment, suggesting doing keyword stuffing in podcast descriptions for iTunes on the Libsyn podcast called The Feed. They’ve been talking a lot about all the different podcasts that have been banned from iTunes for doing keyword stuffing. Don’t try it.”
We should definitely clarify. We weren’t saying do keyword stuffing. We were saying it does work because the way that the algorithm is not very advanced. They fixed that longer term but you’ve been able to keyword stuff and rank for searches relatively easy on iTunes. Now whether you do that, because if you do it, you could get banned. If you are a successful podcast, and you’re driving users, and you’re do little bit of it, meaning, a little bit of SEO. I’m not saying your stuff in 20 keywords that have nothing to do with your podcast, try to rank for all these topics that you don’t relate to, but if you do intelligent SEO on your podcast.
We’re a show about startups. In the description, I want startups at least a couple of times in plain English, in essence it’s not startups-comma-business-comma, mix – all this stuff, but it’s an English flow that makes sense. I don’t feel like you’re even walking a line there. I feel like that’s a pretty reasonable approach to this. So, stuffing is not what I would recommend and it’s not what we do but it is thinking deliberately about how you write the description, the subtitle, and the title of your podcast.
Mike: I don’t remember whether it was you or me that said that but I probably would have referred to it as keyword stuffing and saying to do that but it’s not exactly right or at least it’s not an accurate description of it. What I mean by keyword stuffing when you’re doing a podcast is being very strategic about what you name it because the search algorithms and most of those podcast directories are really, really dumb. So, it’s not and I responded to this via email as well.
It’s not an accident that our podcast is named Startups For The Rest Of Us. We did some basic research and found it like those engines are just stupid. They’re not very good. They look at the title, they may look at the subtitle but those things count much higher than anything else. It made a lot of sense for us to call it Startups For The Rest Of Us and plus, we have the domain name, so it just worked out. But it is a good distinction to point out the difference between being strategic about that versus what is legitimately keyword stuffing where you’re just repeating the same words over and over again.
Rob: Yeah. There’s a reason we still rank high for that term even though there’s the Gimlet Media startup podcast and then there’s Mixergy, and there’s Jason Calacanis. There’s a lot of competition for that term and yet we’ve always ranked in the top whatever 7-10 of those, depending on what area of the world you’re in.
Our next question is about shady competition and how to handle it. It’s an anonymous email. It says, “Hi, Rob and Mike. First of all, thank you for all the work you guys do with the podcast and the community. Rob’s book, Start Small, Stay Small was the beginning of my life as an entrepreneur and your podcast made me quit my job and start to work full time on products.” Hey, we should add him to our list, Mike, right now our success list. “Right now, I’m one of the two co-founders of a profitable SaaS business.”
“Earlier this year, we did an AppSumo deal and during its promotion, a competitor spread false rumors about us in several private Facebook groups. He said that we had sold the business and that the app is going to close up shop right after the AppSumo deal was over. ‘Here’s some evidence,’ and he sent us a screenshot of the person saying this. This is crazy. We decided to completely ignore this and do nothing about it. In hindsight, this was a good move because in some Facebook discussions, it completely backfired on him and right now he has stopped this as far as we know. Im worried about facing this situation again now that we are growing bigger. What would you do in situations like these? Thanks for all your hard work.”
It’s a good question. It’s a tough question.
Mike: It is a tough question and I think it comes up as your business gets bigger and as you’ve been in business for longer, these situations come up more often just by virtue of being around. I think in most cases it comes back to like, what is likely the north star for your business and how do you conduct your business? Are you really shady about it or are you pretty honest with your customers, upfront, and transparent with them? Then, that has to be contrasted against who is making these types of claims, what people think of that person, and what they know about him versus what they think about you and what they know about you.
It boils down to the audience themselves and how much they like or trust the source of their information. I think in cases like this, most people are going to be pretty—at least—objective enough to say, “Yes, that’s true or false or that goes against my fundamental beliefs about what I’m hearing,” and that’s the way that they’re going to side.
If you know that you run your business on the up and up, I would totally not worry about that stuff. You might make one comment or response and say, “Hey, that’s totally not true,” or you could just ignore it. The people who know you well enough are going to ignore that and they’re probably not going to apply any credibility to it. There’s going to be people who don’t like that person already and is not going to take much for it to backfire in their faces, which will stain them basically in that person’s eyes forever.
I’ve seen this happen in a bunch of different cases. Some people get into fights on Twitter or Facebook or wherever. There were some of them are just personalities and they clash. The audience of one person’s side with that person. The other one’s side’s the other. It’s just going to happen because those audiences tend to be siloed. It’s based on their relationship to them and their trust. If you develop that trust over a long period of time, it’s not going to go away. I would not worry about it.
Rob: Yeah. I think you kind of have three options when this happens. You can do nothing. Intentionally decide, “Hey, I’m going to let this person burn themselves down and makes them look dumb.” Also, I would say most people who do this stuff don’t have very large audiences. You and I dealt with trolls over the years. I’ve had some pretty gnarly ones and all of them, except for maybe one or two, had 80 followers. I mean, there’s just nobody who cared what they were saying and they were trying to pull me into a fight because as soon as you engage with them when you have 13,000 or 14,000 followers, or 50,000 or 100,000, then you’re giving them attention.
That’s one thing, I would say is these folks tend to be to not have a big audience and then I totally lean towards completely ignoring because it just makes more sense to do that because no one’s hearing them anyway. But if they’re that rare exception and they are reaching people—in this case, probably Facebook groups—is tough because they are at least being heard. You can do nothing and if they’re being torn down in a group and people are saying, “I know that’s not true or whatever,” then I don’t need to say anything. You could just post one post and decide that you are not going to reply.
Someone like this is probably going to be a troll and is going to say things intentionally, that are going to try to make you respond because that’s a big thing that trolls do. That’s one of the good skills. If you have good troll game. You know what to say things to make people mad but you say things that make them want to respond, and you responding is actually losing. That’s how I think about it. That you’re giving in and you’re letting them have power over you, to make you respond to something that you probably know you shouldn’t.
Back to the three options, it’s do nothing, it’s post one thing that says, “No, this is not true, this is completely false or whatever,” and then don’t respond again. So you have come out, said it, been clear, and say nothing. Or the third one is to go on a full-on war with them right in. We’ve seen this on Twitter but you spend of time, you spend a bunch of energy, you just waste a bunch of things, and both of you look like idiots. People sit there, watching, and think, “What are these fools doing?”
You can obviously tell where I land. Its number one or number two, depending on the circumstance. But no, it sounds like in this case, you made the right call and then moving forward, I think you just got to use your judgment on that. But it’s a tough one, tough one when this happens because it feels crappy, especially when something is this false. It sounds just coming complete manufactured, something that wasn’t true. It’s bizarre.
Mike: Yeah. It’s very easy to take it personally, too, because it’s your business and then there’s making comments and you don’t want people to believe them. The reality is people are going to believe kind of what they want to and what they’re inclined to anyway. Interjecting yourself is not going to do yourself any favors in most cases.
I think Rob’s advice of either do nothing and ignore it, or one post and that’s it, do not re-engage. If any sort of protracted engagement, especially publicly, is never going to fall in your favor. I don’t know of anyone that has.
Rob: And our last question of the day is about pruning email lists. It’s from an anonymous emailer. He says, “Hi, Rob and Mike. We’ve got an email list focused on WordPress development. It’s currently around 6000 subscribers. It has a 20% open rate. I believe that we should regularly purge non-engagers. People who are not opening, has a Drip lead score of 0 or less, et cetera.”
“But my business partner disagrees. I think that pruning non-engagers helps our list health, which keeps us in the best hub of Gmail, et cetera. He thinks that non-engagers may reactivate and also pad our numbers for sounding impressive to prospective advertisers, et cetera. What are you think? Is there a right answer? What would you do?”
Mike: That’s tough because it sounds like there’s two different things going on. One is how are those subscribers impacting your business itself and the sales. Then there’s also the padding the numbers to sound impressive to advertisers. That’s a tough call there. I think that if you’re going down the route of purging them, I would put together a re-engagement campaign instead of outright purging them. That way, you reach out to them and say, “Hey, looks like you haven’t been engaged with our emails lately. Click here to stay on the list.” You can send a couple of those and if they re-engage, great, keep them on the list, and if not, then purge them.
I don’t think that I would go down the route of just blatantly getting rid of them. The other thing I would question is how got on your list and this is something for you to think about is, was it double opt-in or single opt-in? If it’s single opt-in, they submitted something or you got their email address from some place else, you just added them and they’re not opening the emails, then chances are good those are totally bogus and you’re not getting through them anyway, doesn’t matter. Those are the two things I would consider for that.
In terms of the trying to pad your numbers for advertisers, I don’t know if I could go down that path, either. You could give them the top line number and then caveat it. Your open rate is really what they’re going to be interested in anyway. You can just do the quick math on it and say, “Well, what’s the actual reach?” If you’ve got a 6000 subscribers and a 20% open rate, then you’re reach is actually 1200. It doesn’t matter how many of those subscribers you purge. You’re still going to have that 20% open rate and a 1200 reach. It doesn’t make a difference even if you purge half of them. You’re still going to end up with the same numbers.
I don’t know if I would worry about that too much. Just be honest enough and prompt with whoever your advertisers are and say, “Here’s what we’ve got for subscribers, here’s what our open rate is, and here’s what we believe our reach and impact is for you as an advertiser,” because if you aren’t doing justice to your advertisers, then they’re not going to come back. And that’s actually what you want? It’s hard enough to land an advertiser or a sponsor for your podcast or your email list or what have you. Don’t destroy your trust as well, because if you do, they won’t come back.
Reality is, the money that you get from any one email or podcast or whatever sponsorship, it’s not going to even compare to the trust that you lose and the potential revenue that you lose from them talking to other people and say, “Yeah, these guys screwed us.”
Rob: I think those are all good sentiments, Mike. I think that’s exactly what I’m going to say about re-engagement and if you search for Drip Workflow Re-engagement, there’s a one-click blueprint that is a fully-built out workflow. With one click, you can install it into your account. I believe it was designed by Anna way back in the day and it’s really good at re-engaging people. You can obviously add more emails to it or whatever.
We ran this on the Drip list, let’s say, it’s got to be 2015, because over time, open rates go down and down and we probably hit 25%. I was, “You know? I like to keep above 30%,” because it does. The lower your engagement rates, it will put you in the promotions tab. Sometimes it will get you in spam, but mostly it can impact your sending domain reputation as well, not the IP address that you send through.
This is a little bit of a tangent but we actually have customers come to us from MailChimp or Infusionsoft, and they would say, “Well, their deliverability wasn’t very good,” and I was always like, “That’s a little bit of a red flag. I know MailChimp’s deliverability is quite good.” It turns out the IP addresses stay with Infusionsoft and MailChimp but the domain you’re using, your ‘from address’ in essence, if you’ve kind of burned that domain by having really crappy open rates, then no matter where you go now with that domain, there is going to be a ding against you in the blacklist. That’s the real struggle. Once you lose that, it’s like bad credit. If your credit score drops, it takes a long, long time to get that back.
All that to say, I like to keep my open rates up. I mean we have customers come in with 3%, 5% open rates and they were trying to juice the numbers thing. My list is 100,000 people. But literally, there is 3000 or 4000 that would open emails and it was nuts. Eventually, you do have to intervene because if you’re on shared IPs, that can negatively impact other customers and such.
All that to say the re-engagement thing, I tried it and it had re-engagements for people who aren’t opening emails already, they’re very, very unlikely to open any additional emails. I remember the results were trivial and almost not worth doing. But you should totally try it and track it because you see in the workflow how many people get to certain steps, and you can just run the numbers.
I’m going to put in all 6000 or I guess not 6000 are unengaged. It’s only 4200 are unengaged. See how many get down to the bottom and re-engage. It tends to be, if I remember correctly, it’s between 5% and 10%. If that’s worth doing to you, then do it. Dump them on the workflow and when it gets to the bottom, poof, you just unsubscribe by default after a certain delay if they haven’t clicked anything. It’s really easy to do.
I agree with you, Mike. I don’t think you need to prune down only the 1200 who are opening—that’s ridiculous—but if someone hasn’t opened 10 of your last emails, very, very, very unlikely they’re going to open any email ever. I like more—thinking about it—if you’re going to do advertisers, instead of saying, “We have an email list of 6000,” you could say, “We have an email list of 4500,” if it does mean that’s what it is after your pruned. “We have an email list of 4500 and our engagement rates are 35% or 40%,” because that’s what will happen. It will send those numbers up.
If you’re talking to prospective advertisers, tell them that, “If you’re looking at other places to advertise, ask what their open rates are like.” Specifically, start pointing this out. I think people should pay more attention to this personally just across the board. If I were going to advertise on any site and they give me an email this size, first thing I would do is I would say, “Show me your open rates. I want to see a screenshot of your MailChimp account. I need you to prove to me that your engagement is not crap,” because again, I just seen too many people with 10%-15% open rates who say, again they have a list of 100,000 but that list might as well be 15,000 or 20,000 person list. It’s just not worth it.
I agree with you, Mike, I think that the results are going to carry the day. I would absolutely prune it. I wouldn’t prune all 70%. That’s not how it works. You kind of go into Drip or whatever email tool is and say, “We’ll have to open the last, what feels comfortable, 10, 12 emails, 15,” you can beyond that, it’s ridiculous. I mean, it’s just too big of a number that they’re never coming back. That would be my opinion on that.
Mike: Well, looks like we’re out of time. I think we’re going to wrap today’s episode up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
Episode 421 | The “Science” of Why “Charge More” Works
Show Notes
In this episode of Startups For The Rest Of Us inspired by a Patrick McKenzie tweet, Rob and Mike talk about the science of why charging more works.
Items mentioned in this episode:
- Patrick McKenzie Tweet
- MicroConf
- FounderCafe
- TinySeed
- Joel Spolsky ” Camels and Rubber Duckies”
- Joel Spolsky ” Price as Signal”
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it, I’m Mike.
Rob: And I’m the guy that knows the intro.
Mike: Oh, be quiet! And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob: I’m doing good. By my calculation, you’ve done the intro 210 times because we tend to trade off back and forth. How is it that you haven’t memorized it yet?
Mike: I was distracted. You know what, the thing is, I missed last episode. It was episode 420. Marijuana just became legal in Massachusetts. I must have been high.
Rob: That’s what we’re doing? Alright. This is going to be a good show today folks. For me, weeks are going well. MicroConf tickets are on sale inside Founder Café and then when this goes live, it will be on sale to our email launch list.
Mike: Yes.
Rob: Head over to microconf.com if you are interested, get on that launch list. You may have missed the first email, but they’ll get a subsequent one I suppose if they get on the list today.
Mike: Yeah. I think that the episode that comes out today, the people who will be getting that email for MicroConf tickets are going to be previous attendees and then next Tuesday it’s going to be going out to the rest of the list.
Rob: There you go. Growth Edition sales out every year so you want to get on that email list if you’re interested in it. How about you?
Mike: Well, I received my Scotch Advent Calendar yesterday. December is looking fantastic at the moment.
Rob: It’s a family tradition isn’t it?
Mike: Well, it just started last year.
Rob: Two years? In this day and age, I think that’s a tradition.
Mike: Sure. Aside from that, just working on the MicroConf sponsorship. That’s in the works. If you’re interested in any of the MicroConf sponsorship options, drop me an email at sponsors@microconf.com and I’ll send you over the break card and we’ll schedule a time to chat about it and see if it’s a good fit for you.
Rob: Other than that, I am continuing to push forward on TinySeed. Did you listen to the episode last week?
Mike: I have not had a chance to. I was high, remember?
Rob: Yeah, that’s right. All week. That was fun. Einar and I just talked it through, talked about what we’re up to, and why we’re up to it, and just the course we take on the funding landscape and even the landscape of what it takes to bootstrap a SaaS these days. Continuing to move it forward. There’s not so much I can talk about publicly but definitely meeting with a lot of founders and just discussing ideas, and thoughts, and stuff.
It’s a fun time. You know how it is. It’s like the early days of anything. This is literally a startup and we’re kind of bootstrapping it even though it’s weird. It’s like we don’t have any funding for Einar Vollset and I at this point. Eventually, once we raise the fund to actually back TinySeed, we’ll have a small stipend or something coming out of it. But it’s not like, “Oh, yeah. You’re doing a startup and you’re going to raise 5 or 10 million and crank it up.” It really is that, it’s the ethos of everything I’ve ever done where you’re capital-efficient, and you’re scrappy, and you’re just trying to hack your way through it. It’s fun.
I enjoy these days of it. There’s just so much creativity involved. It’s a problem that we’re looking at from a new angle and we so there aren’t overt solutions that others have tried and so we’re really trying to figure it out and to innovate on something that I think we believe needs some innovation.
Mike: You know why I think it’s so fun? It’s because you’re so early on that you haven’t actually run into any real problems yet.
Rob: That’s exactly it. It’s like any startup. It’s fun until you have to actually start writing code or you have to actually start selling to customers or supporting them in whatever. All the headaches crop up.
Mike: I do want to point out that you and I had an “argument” over whether or not it was a startup that you kept denying it and you’ve referred to it as a startup several times already.
Rob: Dang it. Right. Because I said I’d never do another startup again and then I was like, “Well, I’ll never do another SaaS app again from scratch.” and then I have all these caveats. Just never say never—that’s my advice.
Mike: I should get you a new bike so you can backpedal faster.
Rob: That’s right. That’s exactly right. What are we talking about this week?
Mike: Today’s podcast episode is inspired by a tweet that I saw on Twitter from Patrick McKenzie. The episode is titled, The Science of Why Charge More Works. Obviously, we’ll link this up in the show notes exactly where that tweet was.
Patrick has been talking about essentially, charging more for as long as I can remember. His tweet said, “Hacker News comment: I moved into a low-wage area and started freelancing. My clients likely think I’m too cheap, but I’m making double what I did before and overwhelmed with work. Suggestions?” and the second commenter said, “patio11 would tell you to charge more.” and he says, “Well, my work for today is done.”
It’s just interesting to see and I even commented on this that it’s funny how just repeating the same two words over and over could practically make you a career for the rest of your life and just say charge more, that’s your advice in almost any situation. Inevitably, in a lot of them, it’s going to work. I thought we’ve talked through a little bit about, one, why does it work? But also we talked through the science and mindset of this as well.
Rob: Yeah, talk through some specifics because you can’t always just charge more, eventually it stops working. There’s ways to charge more and do you grandfather. There’s specifics on that and that’s what we’ll talk about today.
I hear you, he’s developed the brand. He just said it so much because there are other people saying it. If you look back at MicroConf talks for example, really early on it was like Jason Cohen said it, Hiten Shah said it, I said it in two of my talks, but Patrick McKenzie has said it over and over and over and it becomes a brand and I think it’s a cool thing to have. Each of us develops our own little corners of the startup ecosystem I think.
Mike: The other comment that he had made in that tweet stream was that, “I think that Gmail folder where I keep my thank you for a salary negotiation post is in the upper seven figures in mostly $25,000 chunks, and given that salary is a vector not a scalar and compounds, that blog post has probably moved $X0 million around.” Basically, eight figures.
Rob: He’s saying eight figures.
Mike: Yup which is huge. To be able to have solid data that you can point to that has shown that you have been able to increase personal revenue for salaries for people is just amazing. But there’s also correlations between what he said in terms of charge more, not just as a person who’s employed for a company, but also in terms of raising prices for your software products.
Rob: Yeah, it’s like charge more for your skills. Charge more if you’re salaried employ by negotiating and I liked that post is really good. We should find it and link to it, but he writes a really good post about negotiation. It’s stuff that I had done intuitively, but I hadn’t put it into words in a framework like he did.
I negotiated every job I ever had. I made more money than the people around me. I was just doing it because I was like, “Well, I know that I’m valuable.” It was this internal thing of, “I know that I have chops at whatever it was” being a developer, or project manager, or a tech leader, whatever the role was. I tend to be, in these environments, a little better than the people around me.
Salary negotiation is something that you should do if you have not. And then when you become a contractor then you’ll learn you can just ratchet that rate up especially once you have referrals coming in. When you launch any type of product or service then you’ll learn to do the same thing. It’s all in line with the same idea of it’s not even charging what you’re worth. No, really figure out how to maximize this and charge based on the value that you or your product provides.
Mike: Yeah and that leads to a blogpost that I recalled reading years and years ago, it’s more than a decade ago from Joel Spolsky. We’ll link this up in the show notes as well, but it’s called, “Camels and Rubber Duckies”. In this blogpost, he essentially talks a little bit about economic theory and how to identify pricing for a product and how do you maximize revenue.
Of course, it has a bunch of different charge and as matrix there says, “If you charge this you’re going to make X amount of money and if you charge this other thing over here you’re going to make Y amount of money. It’s that more or less and are you more profitable as a result.” It’s like, “Well, it depends on whether or not you are able to sell just as many as you where before if you’re charging more.” If you charge more and you’re selling more then, if the math works out, yes, you’ll make more money. But at some point you’re going to raise the prices and the number of units that you sell starts dropping as a result and at some point further than that you’re going to start making less money. Where is that point? How do you figure that out?
One of the interesting pieces of Patrick’s charge more philosophy is just the fact that it forces you into situations where you are price testing. You’re checking to see if charging that higher amount of money is going to make you more or if you’re not going to get as many sales.
Rob: Here’s the thing, there are multiple stages of startups. We’ve talk about this over and over. There’s super early days and then there’s right before product market fit, and there’s after product market fit, and then there’s the growth stage. In each of those, you have to approach things differently, your thought process is a little different. In the very, very early days literally, your first 5 or 10 customers, I don’t know that you want to charge more but you should charge something.
I’ve seen startup founders be like, “Yeah, I’m going to comp the first 10 early access users just as thanks for whatever and they get lifetime account.” And I’m like, “That is a terrible idea.” Because those ten people are the people that are most eager to use your product and they’re going to get value from it. Why should they get that for free? Maybe give them a discount, maybe. Maybe. Maybe not.
As you’re getting to product market fit, you should be trying to push that price up. Once you’ve hit it, then that’s where you go every six months or every year your product is getting better. It’s SaaS app, I’m going to assume or something that you’re developing. People are using on-going that you’re developing features for, and it’s becoming more valuable to them, so they should pay more. Unless, the only time you can’t necessarily do that all the time is if you have a bunch of competitors and you’re kind of commoditized or they’re implementing these features that have similar rate to what you are, and you don’t have enough differentiation to basically be able to raise prices for that. Someone’s saying, “Well, I can just switch over here.” Switching customer involve then.
As you scale up, you’ll see these companies once you do become, you’ll look at HubSpot or Salesforce, someone who goes beyond that, their pricing just gets crazy where it’s crazy from our little B to SMB perspective when we typically think, “Yeah, we’ll charge someone $50 or $100 a month.” And they’re charging $5,000, $10,000, $20,000 a month that depending on plans.
All that to say, I like this as a sentiment. I think most people, especially early stages, especially beginners, they just don’t charge enough. I think we’re going to talk about a little perspective here of how to do this or how to increase prices without just making that your default because at a certain point—as you’ve said from Camel’s and Rubber Duckies—it’s a losing proposition.
Mike: I think one of the reasons why see larger companies like HubSpot charging so much more and in amounts that founders of smaller companies look at and say that’s just a ridiculous and absurd amount of money to charge, we’re a little disconnected from large companies purchasing decisions. Me, personally, I’ve worked at an extremely large company that’s 25,000 employees—that was almost 20 years ago at this point—and I was not in any way shape or form involved with any purchasing decision ever at the company.
By the time I’ve moved on, I’ve never really worked for what I would say a large company or been in this position where I’m involved in those purchasing decisions. I don’t have the experience or the mindset of how those decisions are made, and I think that contributes to why we don’t necessarily understand it as well.
If you try to put that in perspective, how big is the company and how much money do they make on an annual basis? If you’re a one-person or two-person company, you’re probably making less than $500,000 a year. If you are a 300-person company or 500-person company, you’re making a heck of a lot more than that, probably talking $50 million or $100 million a year.
For them to spend a couple of $1000 a month is not that big a deal, to you it is because that’s a huge chunk of your budget. To them, it’s a really super tiny percentage and they, for the most part, just don’t care.
Rob: That’s right. Especially if you’re going up market into companies of any kind of size, they’re not price comparing nearly as much as we think they are because they’re not consumers and they’re not anywhere closer. Further you move up the chain from consumers, the less price comparison that goes on, the more I don’t know–it’s like politics in getting this person on board and convincing this whole team to do things and there’s just so many other factors in it. Their price is one but there’s many others. But when you’re working with consumers, price tends to be the highest factors. A lot of price sensitivity selling that.
I met with someone who’s selling software to PC gamers and it’s like, “Ouch.” If someone comes in offering that is $1 less than yours, you’re going to lose people. They will go to the pain of switching to save a dollar or two a month. It’s just a totally different ball game when you’re dealing that.
Mike: I think that the mistake a lot of people make is when you say consumer I would almost lump in like freelancers and companies with less than two or three employees. I know that’s not a direct comparison because if you’re selling consumer products versus business products there, is a very big difference between the actual person who’s purchasing it. But in terms of mindset, those very small business owners have a very close mindset to the consumer. It’s not about what they do, it’s about how they approach their buying decisions.
Rob: I would agree with that. I was talking with Einar the other day and I have the mental classifications for business type or customer type and obviously B2C is one a lot of us think of. Literally, it’s Verizon or if you’re selling software, FTP software to the masses, and then I was like, “You know, there’s this B to Prosumer which is kind of hobbyist.” Let’s say you’re selling to photographers who do it on the side or most or not full time, but it’s this hobby they do on the weekend and they most to it to pay for their gear. They charge people so that they can afford more gear because there’s not so much money in it. It’s a B to Prosumer.
Then there’s B to A. It’s B to Aspirational folks. Frankly, it’s the smart passive in [00:15:08] or it’s folks who aspire to be something. People negatively used the term ‘wannapreneur’ which I feel like it’s a negative thing to say about someone, but it’s folks who want to be entrepreneurs. They’re really aspiring so they are willing to spend some money, but the churn is really high, and they definitely are consumer, but their behavior is different than someone buying a cellphone or cable service because they are trying to invest in a business. I actually think the behaviors of those three are different.
I like what you’re saying, there’s this B to VSB—very small business—which is basically the one that one- or two- or three-person company. They’re still going to have price sensitivity, but I don’t think as much as a consumer. Then there’s B to probably just regular small business and then B to Enterprise. There’s a mid-market in there so you can go all types of categories in there but each of those going to have their own pros and cons in terms of price sensitivity as well as churn, sale cycle, all that stuff.
Mike: I think you can debate all day about exactly where the different levels are whether it’s five employees or ten employees or whatever, but the reality is, as you move from the general consumer upmarket you traverse through that spectrum of purchasers, price sensitivity is a lot less. Going back to the Camel’s and Rubber Duckies trying to optimize your revenue is about doing price testing to see where the different breaking points are.
The simple explanation for charge more is, you increase prices, you’ve measured the total revenue and you repeat doing that until revenue starts to climb. Then you find out why it declined and try to solve that particular problem because it could be that you got your revenue to a certain point and then you try to charge more, and you come to find out that, “Oh! There’s a credit card limit for a maximum purchase on a monthly basis from a single vendor.” Maybe it’s $500 or $1000. Joel talks about in his blogpost, but they’re not just allowed to purchase something that costs more than that without a signature and maybe that’s why your revenue decline. It may not necessarily be directly because your price bar them from, but it could be something ancillary to that. You just have to figure out, why is that? Are you not provided the value? Or is there some other external factor. Once you’ve find out those, see if you can try to solve the problem and if you can raise prices and charge more.
Rob: Again, the mistakes some founders make is people will cancel especially in the early days. You’re trying to find product market fit. I’m trying to get people to use it. People are cancelling saying, “Ah! It’s not worth the money.” That’s not to say it’s too expensive. What they’re saying is you haven’t built something that they actually want to use. If you built something killer that they really need in their day-to-day or really change their workflow, it would be worth that money plus more. This is something I talk about—it’s aspirational pricing.
In the early days of Drip, Drip was very simple. It was before it was really an ESP, and automation, and all that stuff and people are cancelling saying, “Yeah, it’s just not worth the money or I can switch to Mailchimp and this and that.” I said, “Okay! It was $49 a month.” I said, “How can we make this into a product that people don’t say that about? That they say, “Oh! It’s totally worth $49 a month.” and that’s is the thread that I kept pulling to get us to product market fit is, “I don’t want to lower my prices because I don’t want another app that starts at $10 or $20 a month because the churn is high.” It’s so hard to find enough customers to make something worthwhile.
This is one of the big things when I looked at starting Drip, I had these lists of things I wanted with my next idea, it was after HitTail. My next app I want it to be $99 a month was the initial aspiration, but I want it to be in $49 by the time we launch. That was the most important one to be honest. I just wanted to move up market because I wanted to build an app that didn’t have the struggles and tap out because if your lowest plan is $10 a month it’s hard. People are moving up often to the higher plans. It’s hard to grow a SaaS app to the levels that I think a lot of us want to get to, the mid-six and seven figure levels.
Mike: The other blogpost that struck me has been highly relevant to this was also another one from Joel Spolsky that he wrote about a year later in 2005, it’s called, Price as a Signal. In this post, he basically talks about how the price that you put on something sends a signal to people about what the quality of it. Low price in relation to other things that are on the market that do the same type of thing, says that it’s a low quality. If it’s a much higher price, it signals that it’s a higher quality and it’s a better product, that does not necessarily mean it’s true. It’s simply the perception that you are putting forth as to why the pricing would be that way. Because there’s going to be some justification for the pricing and to the buyer, they don’t really have any of the inside knowledge so their natural assumption is, “Oh! Well, it must be better.”
They would really have to dig in and try your product and almost do a side-by-side comparison against other products. Not every customers’ going to have that kind of time on their hands. Some of them just need to make a decision and move on and they’re like, “I just want a better product so I’m just going to pay the higher price point for it.” That’s especially true when you get into the higher pricing tiers where those people are less price sensitive and they’re like, “I don’t care what the price is. We just need something. We need it to work, we need it to be good, so we’ll just buy the highest price thing we can find or something that’s reasonably high priced.” You don’t want to spend $50,000 a month when you can spend $5000, but if the pricing is listed on the website and its $300 a month, and you find something else that’s $900 a month, what are going to do? If you don’t care about price, you’d probably go with $900 a month because you’ve got the funds to spare. It’s probably not your money anyway and you need something to work. You don’t want to go to your boss and say, “Hey, this didn’t work because we went with the $300 product.”
Rob: Yup. I think it’s good. I think price signaling is definitely a real thing that folks should consider and being the premium offering. It’s an interesting marketing play; an interesting positioning play. I think WP Engine did this really well in the early days. They just said, “We’re going to be the expensive solution but we’re going to deliver on it.” You have to deliver on that.
Mike: The interesting about what you just said was that I think the price could send the opposite signal as well. If you price too low, it can tell people that your product is not just any good. You can look at a bunch of different industries for that. But I think one that pops-out of my head is the App Store. You look on there and there’s tons and tons of apps that are either free or for 0.99 cents. I personally look at them and say, “Well, if it’s 0.99 cents, how great can it be at this point?” because there’s a lot of things that charge more than 0.99 cents. There was kind of a standard thing to charge and now, it’s not. There’s a bunch of apps that I pay $10 for.
Rob: I still buy apps. I think the App Store is kind of a… How do you say?
Mike: Crap factory?
Rob: It is a crap factory. No. I was going to say it’s not a true market because Apple has artificially incentivized having cheaper apps. You know this thing, you want your complement to be free. Whatever product you have, if your complement is free then you become very valuable. Or you want your complement to be commoditized and as low priced as possible.
You think about Microsoft with Windows, what is their complement? What is the thing you need to use in order to use Microsoft Windows? Well, you need hardware, you need a box to run it on, and it was great for them that there wasn’t just one other provider. There was HP and there was Dell and there’s all these other providers now. It was like, “That’s the way to be.” And if you are a hardware maker, what you want is to have a specific hardware that no one else can use and you want basically the operating system to be commoditized. Your complement is free.
That’s where Apple with its App Store, what is the complement to an iPhone or an iPad? Well, the software component is obviously the operating system which they control, and then there’s apps. They want apps to be as cheap as possible because they want there to be a bazillion of them and they want to have the big ecosystem that everyone comes to. It’s same thing that Amazon has done with Kindles, with Kindles and Kindle books. They artificially depressed the pricing and they’ve had lawsuits about this where there’s class action lawsuits.
If you sell a Kindle book, I think you know, you can make it between 0.99 cents and is it $9.99 and they give you 70% of that. But if you make it $10 or $10.01 then they keep 70% of that. You only get 30% so in order to get the same amount, you have to jack your price up to whatever the math on that is—$30 or $25 bucks or something and it pissed people off because traditionally books have been, when they’re hardback, they’re $25 or $30, then soft cover $15 or $20. Amazon basically came in and said’ “Nope, we want the complement of the Kindle which is the content, which are the books, we want them to be inexpensive.” It’s not something I’m saying in theory, we see this happening.
Mike: But I think that’s a little bit different just because of the ecosystem of–somebody else really kind of controls the pricing in the marketplace. You’d have to go through somebody else. I think that’s the issue versus if you are selling a SaaS app where a book from your own website, you can price it whatever you want. There’s no outside influencers to essentially anchor your pricing or artificially influence it. I would say that it feels like that’s a little different. But I agree that that’s what they do.
Rob: It is different and that’s what I was saying about the App Store. You were saying, if I see an App Store app that’s 0.99 cents, I’d think this is probably crap, and I don’t because I know that’s artificially low because of what Apple has done. If that makes sense. Yes, on the open market, you don’t typically buy FTP apps or whatever it is for 0.99 cents. Before the App Store, they were $10, $20, $30 and then the Apps Store has driven a bunch of them down. That’s what I was saying is I think you can have artificially low pricing if there’s someone manipulating it.
Mike: Yeah. What I was saying was like, that’s my inclination to feel that way, but I also objectively know that it’s not true—is really what it comes down to. Because you can recognize something and feel a certain way, and that’s how I feel when I look at those things, but I objectively know that that’s also not true.
Rob: Right. Because I have plenty of 0.99 cent apps that I use all the time that are good apps
Mike: I do think this kind of brings about the question of, “How do you go about raising your prices if you’re already, I’ll say, entrenched in some customer base where you have traffic, sources coming in, and they’re already accustomed to seeing prices in a certain range?” Let me reframe that a little bit just because I want to be very clear on what I’m trying to say here. If you’re marketing to a certain demographic of people who are anywhere of that prosumer range that we talked about to like four or five employees in the company, how do you then increase your prices such that you can do this type of testing and still be attracting the right types of people? Because at some point, if you start changing your pricing enough, you’re going to put yourself in a position where the only people who would buy it is in this different demographic, but you don’t have the incoming traffic sources from that different demographic. Do you see what I’m saying?
Rob: Yeah. That’d be the hard part if you really want to double, triple, quadruple prices or something. That would be hard. Obviously, if you’re going to incrementally go up, let’s say 20% or 30%, you can email your whole customer base and you can say, “Look, we’re going to grandfather you for a certain amount of time,” and you can email all your trial users and go on social and promote it and say, “Hey, we are about to raise prices. If you’ve been waiting on this then sign-up now.” We did that with Drip a couple of times because we raised prices every 9-12 months. Then you’d get this big influx, you’re going to suck all the air out of the room and you’d get this you’d get this big influx of new trials and hopefully the convert because then it’s like, “Hey, you’re grandfathered in for this amount of time.”
But what you’re saying is different than that. You’re saying you’re going to double prices and the traffic that’s coming isn’t even associated with that. I would almost say if I really wanted to do that, oh, man, that’s be tough. If you’re going to do that, you’re almost pivoting or you’re repositioning as something different.
Mike: Yeah, that’s what I’m saying is like, yeah, you almost have to reposition yourself. If you’re changing pricing dramatically enough that you’re going into that, it’s a 5%, 10%, 20% increase is not a big deal, but when you’re doubling or tripling, if you’re anywhere within halfway to the point where it no longer makes sense for them to buy, you can really hurt yourself.
Rob: Yup, you could. I think it has to be very calculated. You can’t just go and do that one day. You have to probably need a new positioning, you need a new marketing message, you need to justify like, “What’s your reasoning that this is now worth twice what it was last week?” I would drill into that fact like, “It’s worth that because we are now built for plumbers and they should pay a lot of money for software.” Or, “We are now the most premium. We have this feature that no one else has.” You got to drill on what is the factor that is differentiating you that allows you to do that.
Mike: But do you have to justify it? Because if presumably the new market that we’re going into is not a current traffic source and they haven’t really seen your product or pricing before, then they wouldn’t necessarily know. There’s plenty of stories out there and actually it’s what people are saying, “Oh, I doubled my prices and I doubled my profit.” And people were like, “Why don’t you double your prices again or 10X them?” I think Jason Cohen talked about that at MicroConf one day where he was like, “Oh yeah, they 10X their prices.” He’s like, “Sales did not change where we make 10X more money.” He’s like, “Do it again.” They’re like, “What?” I definitely think it’s possible to do it, it’s just a question of do you have a plan for backing off if that goes wrong?
Rob: Yeah, that makes sense. I mean, you can always roll it back. I remember Intercom did this maybe three years ago. I believe they were either doubling or quadrupling. Pricing was huge jump. People got so mad that they just [29:08] it and then just backed away from it and they said, “we’re not going to do that.” Then recently, I think aren’t they doubling prices again? I had heard they’re going up 2 or 3X. I think they’re having the same backlash but they’re so big now, I don’t know if it matters.
Mike: Or they’re just measuring the response and saying, “Well, we’re going to double the pricing but only a quarter of our customer base is going to leave so, we have less strain on our servers and we don’t need to deal with as many customers and we’re making more money.”
Rob: I think they’re grandfathering for a year. I think they may just do it and hope they don’t lose as many.
Mike: That seems like the Netflix tragedy. They’ve announced it and then they grandfathered everybody in for two years and there was an initial uproar but they’re like, “Hey, but your price isn’t going to change for two years.” And then like, “Oh, okay.” And then two years later, it silently went up, and nobody cared.
Rob: Yeah. Was it two years? I think it was a year.
Mike: It might have been one year and then they changed it to two, I don’t remember. It seemed like a while.
Rob: Here’s the thing with Netflix though that’s different than most SaaS apps we would run across is, Netflix has—whatever it is, what is it—30-40 million subscribers? I don’t know. It’s tens of millions of subscribers for sure. They add new subscriber each quarter. Let’s say, “Hey, we have 1 or 2 or 3 million new.” But if they grandfathered everyone permanently that would seriously debilitate their business. This is where that B2C comes in. You’re dealing with such a volume play and you already have such a huge customer base that raising it by that $1 a month is again, let’s say, they have 30 million customers, that’s $30 million a month that they are making. If they piss a few people off and they leave, it’s worth it to them because they already have such a huge user base. It’s worth it to them to raise it upwards.
If you’re a SaaS app and you have 1000 customers and you plan to add another 500 this year or something, you got to think about the calculus there.
Mike: Yeah, totally. When you were saying there’s a difference between Netflix and the types of business we run, I was like, “Oh, it’s what, 30 million, 40 million customers.”
Rob: Totally. That’s the difference.
Mike: That’s the difference.
Rob: Our customer numbers are a rounding error to them.
Mike: Yup, basically. On this topic, we talked a little bit about it in terms of the App Store and low pricing, but what is charge more really mean for freemium? Does that mean get rid of freemium? I think you and I are probably in agreement that, “No, that’s not what that means.” Freemium is a distribution strategy not a pricing model.
Rob: That’s right. It’s a marketing approach.
Mike: Right. You’re not going to be able to sell at a zero which is technically a loss if you’re using server resources and be able to make it up on volume. It’s just not going to happen. But if you’re relying on converting people and using that as a way to attract attention to your app in order to acquire those people, that’s a totally different thing.
Rob: Yep, I would agree with that. By the way, the title of this episode is, The “Science” of Why “Charge More” Works. Science is in air quotes because it’s not true. It’s scientific but there’s a lot of data to back up the observations that we’ve made on this episode. Patrick Mackenzie has been saying it for six or seven years. First time I ever heard him say that was on MicroConf stage.
Mike: I think that’s the first time I had met him in person.
Rob: Yeah, 2011.
Mike: Well, special thanks to Patrick Mackenzie for speaking at MicroConf for all these years and also attending and for being part of the community. Also, thanks for the inspiration for this episode.
Rob: I think that wraps us up for the day. If you have a question for us, call our voicemail at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, it’s used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.